(1 day, 12 hours ago)
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20:23 - The House divided: - Ayes: 311 / Noes: 96 - Question accordingly agreed to.
Madam Deputy Speaker (Caroline Nokes)
Before we commence consideration of the Lords message, I confirm that nothing in the Lords message engages Commons financial privilege.
Clause 23
Right not to be unfairly dismissed: removal of qualifying period, etc
The Parliamentary Under-Secretary of State for Business and Trade (Kate Dearden)
I beg to move,
That this House disagrees with the Lords in their amendment 120N to Commons amendment 120G and their amendments 120P to 120S to Commons amendment 120H.
I am returning for the fourth time to the consideration of Lords amendments to the Employment Rights Bill. The Bill will bring employment rights legislation into the 21st century, extending the protections that many British companies already offer their staff to all. I cannot hide my frustration that, once again, we have been blocked from getting this Bill on to the statute book by the other place.
Sir Desmond Swayne (New Forest West) (Con)
Which British company offers unlimited compensation for unfair dismissal? What message does this measure send to companies that can locate well-paid staff anywhere in the world?
Kate Dearden
I will allow the right hon. Gentleman to listen to the reflections further on in my speech. I am not sure he entirely grasps the compensation cap proposal and our intentions.
Angela Rayner (Ashton-under-Lyne) (Lab)
What message does it send to the British public when 33 hereditary peers defeat the Government by 24 votes on a manifesto promise? Some of the wealthiest are blocking measures on sick pay for some of the lowest earners, which will miss the April deadline. Should we not get on—go through the night if we have to—and get this Bill passed?
Kate Dearden
We are absolutely determined to get this legislation through, and I urge colleagues in the other place to pass this Bill for the reasons my right hon. Friend outlines: 1.3 million people will be entitled to statutory sick pay from as soon as April. That is significant, and it is why it is so important to get the legislation on to the statute books.
Jim Shannon (Strangford) (DUP)
My colleagues in the other place all expressed concern about open-ended, unlimited compensation. That is a concern not only for them and for colleagues here, but for businesses back home. I know the Minister means well, but for goodness’ sake, this will not work for business.
Kate Dearden
If hon. Members allow me to make some progress, I will get to the background and reasoning for the compensation cap.
Continued delay to the Bill will put implementation at risk, which creates insecurity and uncertainty for workers and employers alike. I hope the other place acknowledges the importance of this and will let the Government deliver the Bill, which is backed by an electoral mandate, as my right hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) said. We have been engaged in ping-pong for far too long, and further delay is in no one’s best interests. I hope the arguments I make today will address the reservations of those Members of the other place who have been engaging in good faith when they have had genuine concerns about the Bill.
As I told the House last week, I convened a series of constructive conversations on the unfair dismissal provisions, which resulted in a workable agreement with trade unions and business representatives and was the subject of Government amendments made last week. I can assure hon. Members, as someone who was in the room during the negotiations, that the agreement between unions and business representatives was made with good will and in good faith by all sides.
As those representatives of the British Chambers of Commerce, the Chartered Institute of Personal and Development, the Recruitment and Employment Confederation, Small Business Britain, the Federation of Small Businesses and the Confederation of British Industry said in today’s letter to the Secretary of State, the “outcome” of the
“dialogue…represented a significant step forward which will have a positive impact on growth and opportunities.”
The amendments tabled in the other place undermine that agreement, as the compensatory award cap would not be removed and instead the Government would conduct and publish a review of the impact of the cap. The removal of the cap would then require further primary legislation.
Andy McDonald (Middlesbrough and Thornaby East) (Lab)
My hon. Friend has set out how sensible the conversations have been thus far, but does she agree with me that they have been totally frustrated by colleagues down the corridor, who have no regard for the mandate that was returned to the Government at the last general election, and that we should stand firm and make sure that these rights are not further impeded by the unelected House?
Kate Dearden
That is why our motion today disagrees with the Lords amendments and insists on our amendments from the previous round of ping-pong, which deliver on the agreement made by trade unions and business representative organisations.
Aphra Brandreth (Chester South and Eddisbury) (Con)
I draw the attention of the House to my entry in the Register of Members’ Financial Interests.
I wonder whether the Minister is comfortable with the fact that introducing an uncapped unfair dismissal compensation award will make the UK an international outlier, when many of our international competitors have clear limits. If she is comfortable with that, what assessment has she made of the impact on UK jobs and inward investment to the UK, particularly in business sectors that are internationally mobile?
Kate Dearden
Our proposal would remove the cap of 52 weeks’ gross pay or £118,223. It is important to reflect that, in practice, few awards get anywhere close to the cap. The median average award for unfair dismissal in 2023-24 was £6,746. Employment tribunals will continue to calculate compensatory awards to reflect the losses that employees suffer as a result of being unfairly dismissed.
Dr Luke Evans (Hinckley and Bosworth) (Con)
Has the Minister conducted an impact assessment? If so, how much does she think this change will cost? How many uncapped awards will be made? These are the kinds of big, important decisions that the other place has concerns about, as do Conservative Members. If she has that evidence, she could put this to bed tonight by simply providing it to us so that we can make an informed decision.
Kate Dearden
An economic assessment will be published, as is standard practice.
Paul Waugh (Rochdale) (Lab/Co-op)
I am sure that my hon. Friend shares my frustration at the sheer misinformation that has been spread about the removal of the cap on compensation. As she rightly says, the median award at the moment is less than £7,000. More importantly than that, only 2% of all employment tribunals ever result in a compensation award for unfair dismissal. Does she agree that the Government have indeed taken into account the concerns of Cross-Bench peers by committing to an assessment, and more importantly does she agree that those employers and the unions together can see what the Opposition do not, which is that this is will be fair to workers and fair to businesses that are fair to their workers?
Kate Dearden
I wholeheartedly agree with my hon. Friend’s comments. We believe that the current compensatory award cap also creates a systemic incentive for unfair dismissal claimants to construct more complex cases, which could take longer for a tribunal to handle. By removing the compensatory award cap for unfair dismissal claims, the incentive may be lessened, potentially making it easier for tribunals to reach a judgment more quickly and decreasing the burdens on the system.
Tom Tugendhat (Tonbridge) (Con)
I am not at all surprised that the Minister is having a little bit of a problem with the other place—after all, she is not the first Minister to have been confused as to what was in a manifesto and what was not; the Prime Minister seems to have been confused about the assisted suicide Bill.
May I raise a question about the cap? The problem that many businesses will have is with insurance. Most businesses take some form of insurance for unfair dismissal. Insurance companies work on the basis that they have an understandable level of risk that they are underwriting. If they do not know what that risk is, they will not underwrite it. The challenge here is that by removing the cap, the Minister is changing the level of maximum risk and therefore making it much harder for insurance companies to underwrite it. Has she spoken to insurance companies about the challenges that this poses?
Kate Dearden
I listen to the Conservatives again and again as they come to the Chamber—they have done it again today—and talk down what was a clear manifesto commitment of this Bill.
Antonia Bance (Tipton and Wednesbury) (Lab)
I am sure the Minister is coming on to this in her speech, but it might be worth reiterating, for the benefit of those on the Opposition Benches, that the best way to avoid having to pay compensation for unfair dismissal is to avoid unfairly dismissing someone in the first place.
Kate Dearden
My hon. Friend makes an excellent point, as she always does, and I thank her for it.
To conclude, we are seeking the support of the House so that we can finally secure Royal Assent and move towards implementing our long-overdue reforms to make work pay. Today’s correspondence from business representatives to the Secretary of State states that British business believes that
“now is the time for Parliament to pass the Bill.”
I urge Members across the House to reflect on that comment, on our election mandate from last year and on all the work and consideration that has been put into this Bill so far in both Houses. I thank all colleagues for their work, and I commend this motion to the House.
Madam Deputy Speaker (Caroline Nokes)
I call the shadow Secretary of State.
Andrew Griffith (Arundel and South Downs) (Con)
The concerns that we Conservatives have with the Bill have long been known, and I accept that we have debated them at length. I will not repeat them all today, because we are not here to debate the whole Bill, just the message sent to us from the other place.
There was a time when the Labour party would have cared about protecting jobs and those who wanted one. There was a time when Labour believed, as we do, in the dignity of work and what that meant for families and communities—a Christian socialism, if you like, rather than the state worship that seems to have replaced it. I cannot honestly think of a previous Government who would ever have passed this Bill—certainly not since the 1970s. The result, whether Labour likes it or not, is that day by day, week by week, month by month, people are losing their jobs.
This Christmas there will be 192,000 fewer people in private sector payrolled employment than last Christmas, and who knows what it will be like next Christmas. We have the worst ever graduate jobs market. Adzuna estimates that jobs for degree holders have fallen by 33%. Labour used to care about youth unemployment, but for those aged between 16 and 24 unemployment has now reached 15%, according to the Office for National Statistics. As has been the case every month so far under this Government, tomorrow morning we are likely to hear that the rate of unemployment is higher.
This Bill could have been on the statute book today, but for one simple reason: a gross betrayal of trust. The small group of business groups that Ministers invited in for tea and sandwiches took this Government at their word.
Antonia Bance
I wonder if the hon. Gentleman would like to tell the House which of these business groups he disagrees with and that he thinks we should not listen to today, because these are the groups telling us and peers in the other place that we should be voting for the Bill. Does he disagree with the British Chambers of Commerce or the Chartered Institute of Personnel and Development? Does he disagree with the Confederation of British Industry, with the Federation of Small Businesses, with the Recruitment and Employment Confederation or with Small Business Britain?
Andrew Griffith
The hon. Lady would have been wise to contain her excitement, because I agree with all of those groups in their letter today, which the Minister selectively quoted; she did not quote them saying that they are not in favour of removing the cap. I have spoken to each and every organisation that was in the room, and they are crystal clear, with one group saying:
“That was not a concession discussed with us or agreed by us in the negotiations”.
I invite the Minister to intervene on me if she thinks that a word of what I say is wrong. She is misquoting, and it is misrepresenting those business groups that do not support the cap.
Why would any sane Government scrap the cap entirely? Indeed, this Government themselves did not for 13 and a half of the 14 months that we have been debating this Bill. It was not in the manifesto or the Bill or the impact assessment. It was not considered by the Regulatory Policy Committee, and it was never discussed in this House until Ministers threw it in at the last moment in a breach of trust of the business groups with which they negotiated.
Angela Rayner
I know where this came from—the new deal for working people—and so do businesses and the trade unions. As the Minister pointed out, there have been discussions, and they came to that conclusion. What is it about protecting people from unfair dismissal that the shadow Minister has a problem with?
Andrew Griffith
What is it about protecting people from unemployment—preventing young people from getting jobs—and from economic growth? The Government of which the right hon. Lady was once a member said that was their No. 1 priority and their obsession, but they have singularly failed to deliver it.
Conservative Members want to get Britain working again. We want jobs for those young people—we think it is a stain on our character that 15% of young people are unemployed—and all we get from Labour is union-paid representatives trying to put more people out of jobs and deny young people more opportunities.
Angela Rayner
I thank the shadow Minister for giving way again; he is being generous with his time. Why does he not have a problem with people being often in insecure, low-paid work without any contract that gives them regular hours? Does he realise how difficult that makes it for young people—any person—to have any security in their life? That was what he presided over in his 14 years of failure, and that is why Labour was elected on this manifesto promise.
Andrew Griffith
Our Government created 4 million new jobs. This Government have lost jobs every single month they have been in office.
The points that the right hon. Lady makes are not those we are debating. There is one issue in front of us, which is Labour’s desire to defend and remove a cap of £118,000. That has nothing to do with ordinary workers. What does it say about today’s modern Labour party that its focus, and the whole reason why we are back here and the compromise was not accepted, is its desire to remove a cap of £118,000, which will only ever benefit the better off?
Sir Ashley Fox (Bridgwater) (Con)
Does the shadow Minister recall that in 1999 when the Blair Government increased the cap, they held a consultation beforehand, and that in 2015 when the coalition Government introduced a cap, they held a consultation beforehand? Why are this Government behaving differently?
Andrew Griffith
My hon. Friend makes an important point, which I hope somebody on the Labour Benches will address. We have seen no analysis and we have no idea of the cost of this measure. Not a single business—not a single person who employs people—has come out and endorsed the removal of the cap. It is beyond me, I am afraid.
Yet what is happening in our employment tribunals? On Friday, as I am sure the Minister knows, it was revealed that the delay and backlogs at the employment tribunal have reached their highest ever level. At the end of the most recent quarter, there were 515,000 open claims. Before anyone intervenes, let me say that I accept that much of that was inherited—[Interruption.] But before Labour Members laugh: the Government are making it worse. Merely since the Bill was introduced to this place, the claims backlog has increased by 65,000. They are doing nothing to address the backlog, which is going up every single month—I do not think they have even discussed it with their calamity of a Justice Secretary —and we know that they have carried out no impact assessment. It is extraordinary. The scrapping of the compensation cap for the highest paid will simply stoke the fire.
I make it a rule not to learn lessons in how to run an economy from France, but even France introduced a cap on tribunal payments to tackle unemployment and encourage labour market dynamism. Perhaps we should take advice from closer to home: today the Health Secretary seems to be no fan at all of giving more powers to unaccountable unions.
Laurence Turner (Birmingham Northfield) (Lab)
Will the shadow Minister give way?
Andrew Griffith
Happily, if the hon. Member will talk about how he will fix our NHS.
Laurence Turner
The debate is on the Employment Rights Bill, although I struggle to follow the line of logic in the hon. Member’s speech. He said that the effect of the change would be to benefit the wealthiest employees, but chief executive officers and other senior executives rarely seek recourse to employment tribunals, for a number of reasons. Can he name a single CEO or equivalent who has pursued a case for an employment tribunal?
Andrew Griffith
Well no, I cannot, because there is a cap—the very cap that the hon. Member’s party is seeking to remove. I try not to be uncharitable about the complete absence of business experience in the Cabinet, but that level of question, together with that impact, is just embarrassing.
The Minister in her remarks—there was not much of an argument; it was really just a critique—blamed peers in the other place for the Government’s own failures. Notwithstanding how peers are doing the constitutional job we ask them to do, Lyndon B. Johnson said that the first rule of politics is to learn how to count. The Government lost the vote on its unemployment Bill last week by 24 votes, but 65 of their own peers did not want anything to do with the Bill—they did not turn up and did not vote. During the passage of the Bill, one Labour peer has even resigned his peerage and joined the exodus of wealth creators to the United Arab Emirates because of what he sees. The Resolution Foundation and the Tony Blair Institute have both criticised the Bill.
By removing that £118,000 compensation cap, the Government are not protecting the vulnerable. If that is what they wish to do, there are other ways to do that, but ordinary workers will never benefit from that. It is a genuinely mad world; I do not understand why we are having this debate.
This time last week, the Liberal Democrats agreed with me on this. The hon. Member for Tunbridge Wells (Mike Martin) has been campaigning for the boss of South East Water to be fired, but without a cap his payout could be millions. Is that really what they want? What changed, other than the appearance of five new Liberal Democrat peers?
Graham Stuart (Beverley and Holderness) (Con)
Will my hon. Friend give way?
Graham Stuart
I am extremely grateful. My hon. Friend is setting out a powerful case. We are puzzled, because a system designed for ordinary workers that has a sensible cap is now being opened up to the very CEOs who, as has been highlighted, would not have previously used it. We have a Labour party in hock to the unions yet strangely proposing a measure that was not included their manifesto which can only help the rich. What happened to the Labour party?
Andrew Griffith
I thank my right hon. Friend for that intervention. I will leave that hanging there and hope that Labour Members will address it.
In conclusion, I ask the Government at this eleventh hour to pull back from the brink and introduce a financial cap so that we can get this business done this week. They have no consent from business, and they sought no support for it in their manifesto. I have talked about youth unemployment and the level of redundancies. We Conservatives will get Britain working again. We will end the attacks on employers and repeal the job-killing measures in the Bill. For the sake of businesses, for the sake of the backlog and for the sake of Britain, the Government should accept the Lords amendment and drop their motion.
Several hon. Members rose—
Madam Deputy Speaker (Caroline Nokes)
Members will be aware that the debate has to conclude by 8.24 pm, so there will be an immediate five-minute time limit. Of course, if Members did not feel obliged to use all five minutes, that would help their colleagues.
Justin Madders (Ellesmere Port and Bromborough) (Lab)
May I first declare my entry in the Register of Members’ Financial Interests and donations from the Union of Shop, Distributive and Allied Workers trade union, as well as my membership of the GMB and Unite trade unions? I am not sure if we are on a ping or a pong now, but there is a whiff of stubbornness about the fact that we are back here again.
Last week, I called for the Government to make this place sit every day until Christmas to ensure we got the Bill through—it is a shame that the other place took that as an invitation rather than the contingency plan it was intended to be, but, if that is what it takes, that is what we should do. We are ready. It is wrong that an unelected house, where jobs are given for life, can dig in and push back on something that will give millions of workers rights that we promised long ahead of an election, and for which we have a decisive mandate.
I commend the Government and the Minister for not backing down. A deal was reached with the relevant stakeholders. It is a pragmatic compromise, and a deal they are publicly saying needs to go through. That is how mature, effective industrial relations are supposed to work.
I do not think that the Lords’ arguments are particularly substantial; they are certainly not reasons to delay the Bill again. Their point that we should not agree with the lifting of the cap because it fell outside the scope of manifesto commitments in this area does not really take us very far, given that the original concession made on qualifying periods was also outside the scope of the manifesto, and of course, that is all part of the same package. It feels to me that this is more about the Lords wanting to have the final word rather than having to deal with the substance.
Graham Stuart
We did not hear it from the Minister, so could the hon. Member please explain the case for removing the cap?
Justin Madders
I am glad that there are some Conservative Back Benchers here. Last week they were all somewhere else, but now we are hearing some contributions. I was not in the room when the negotiations took place, but I understand that that was the deal. I am afraid that there have been some wilful misunderstandings on the Conservative Benches about what lifting the compensation cap actually means. Compensation for unfair dismissal is calculated by defined heads of loss under the law, so lifting the cap will not change that one bit. If the claims are still necessary, they will be there. It just means that some workers—particularly older workers who might not be able to get another job and who may have substantial pension losses—will benefit, not the fat-cat bosses that have been talked about. It is important that we stress that point.
Also, I do not remember the Conservatives’ manifesto in 2010 promising to double the period for qualification on unfair dismissal. Neither do I remember a pledge in either the Tory or the Liberal Democrat manifesto to put a cap on compensation. None the less, the coalition Government pushed both those policies through. Those who claim that the lifting of the cap will see an avalanche of claims ignore the fact that the rationale used for introducing the cap in the first place was to deal with perceptions about levels of compensation people might recover—in other words, legislating on perceptions rather than on facts—and I have to say, we have heard plenty of those perceptions repeated again tonight.
The Opposition can complain about a two-year wait for tribunal claims, but I am grateful to the shadow Secretary of State for recognising his party’s culpability in that. It is important that this Government are working with the trade unions, businesses, the judiciary and ACAS to find ways of improving our system, so that we get justice more quickly, instead of just ignoring it as the previous Government did. This Government have shown flexibility and strength to negotiate a change in order to get a deal over the line. Workers in this country should not be made to wait any longer for these important rights.
It is worth reminding the House that the road map we agreed earlier this year shows that the following laws should be in place by April 2026: doubling the maximum period of the protective award; day one paternity leave and unpaid parental leave; whistleblowing protections; establishing the Fair Work Agency; day one statutory sick pay and entitlements for the first time for millions of people who have been denied them to date; and simplifying the trade union recognition process. These are not minor or trivial measures. They are substantial changes that will improve the working lives of millions of people. We should be proud that it is a Labour Government who are delivering them, and we should be determined to deliver them by April 2026.
Of course, that is just the beginning. Genuine flexible working, ending zero-hours contracts, banning fire and rehire—there is much more in this Bill that really matters to working people. And there is much more beyond the Bill: the reform of TUPE and parental leave and dealing with the epidemic of bogus self-employment are of huge importance. These are the sorts of things that a radical, reforming Labour Government need to tackle, because the world of work is changing. It is changing far faster than we can legislate for, but we can insulate our constituents against the worst excesses and unintended consequences of the tech revolution by putting security and fairness at the heart of every employment relationship, and we need to do that now. If we do not, we will have failed not only to deliver on the promises we made but to stand up for the very people we were elected to represent, so I call on the other place to agree with the will of the democratically elected Chamber and to deliver finally on our promise to make work pay.
Madam Deputy Speaker (Caroline Nokes)
I call the Liberal Democrat spokesperson.
Sarah Olney (Richmond Park) (LD)
Today we are debating the fourth round of consideration of Lords amendments to this Bill, and this long and protracted process says a lot about the way the Government have approached this legislation. The Bill was initially put together at great speed, missing much of the detail; there was a long series of Government amendments late in the process; and now a major last-minute change on the compensation cap for unfair dismissal has been sprung on businesses and Parliament. Regardless of what one makes of the different measures in the legislation, I think most of us would agree that the process followed in designing it has been less than ideal. Having said that, let me reiterate what has always been the Liberal Democrat position on the Bill: we support many of the aims of this legislation.
We welcome expanding access to statutory sick pay, improving parental leave and taking steps to address the massive pay gap facing social care workers. We agree with giving those on zero-hours contracts more certainty, even though we proposed what we view as a more practical and balanced way of doing so, and we are pleased to see a unified Fair Work Agency, which we also called for as a way of empowering employees to exercise their rights without fear of any negative consequences. However, we have made it clear that we have significant worries about the specific way in which some of those measures would be implemented, and we have repeatedly raised our concern that crucial detail was being left for secondary legislation.
By far our biggest concern was the complete lack of clarity on unfair dismissal and probation periods, which is why we have worked in both Houses to secure a vital concession setting the qualifying period for unfair dismissal at six months. We are proud that when some tried to brush aside the concerns of the business community and others sought to frustrate the process, it was the Liberal Democrats who secured this vital provision. It is the role of any responsible Opposition party to engage constructively and achieve substantial improvements for the good of our country. It could not be clearer that this fair and sensible shift will equally benefit businesses and workers. So many businesses I have spoken to have said that this is the single most meaningful change that could have been made to the Bill.
Dr Luke Evans
I am conscious that we are debating a particular point. Is the hon. Member voting for or against the cap? That is the essence of what we are looking at today.
Sarah Olney
I am glad that the hon. Member has raised that. I was coming to that in my speech. Perhaps he could listen with a little more attention.
Employers have finally been given the necessary clarity to make hiring decisions with confidence, and we have avoided the danger of unnecessarily slowing down the labour market even further, which would have deprived so many people of vital employment opportunities. That is exactly what the progressive Resolution Foundation think-tank warned of when it said there was a risk that
“employers would be nervous about hiring new workers or offering shifts, and this would make life harder for job seekers.”
As I pointed out last week, it is really disappointing that the Government decided to muddy this improvement by simultaneously abolishing the cap on compensation for unfair dismissal. Employers were not in favour of scrapping the £118,000 cap, and I once again point out that bringing in a change like this at the last minute is not how we build trust between Government and business. However, I note that employers and business groups have been equally clear that this last-minute change must not stand in the way of the far more important changes secured with regard to the six-month qualifying period. Above all else, business values pragmatism, and that is exactly why it wants to see this breakthrough protected and enshrined in law. That is what has guided our approach throughout.
Will the Minister confirm on the Floor of the House that the Government will conduct an assessment of the impact of the removal of the compensation cap, actively seeking views from businesses, as was indicated to the Liberal Democrats in the other place? On a broader level, will she give a cast-iron commitment that the Government will hold regular debates in both Houses to ensure that Parliament can scrutinise what work is being done to consult businesses and workers on all relevant implementation aspects of this Bill? How are the Government planning to support employers in order to ensure that they have robust policies and practices in place to navigate these changes to the unfair dismissal regime?
Lastly, to those in the Conservative party who have been trying to sabotage this crucial compromise on the six-month qualifying period, I simply say that they are acting not in the interest of British businesses but only in their own narrow party political self-interest.
Graham Stuart
On that very point, does the hon. Member believe that it is totally pragmatic to have disregarded her objections to the removal of the cap in return for additional places for the Liberal Democrats in the House of Lords?
Sarah Olney
It is so revealing of Conservative Members’ mindset that they cannot believe what I am actually saying is the reason for our change, and that they assume instead that we must have sought some benefit for ourselves. It is so revealing that that is what the Tories think. It beggars belief that the Conservatives, having hammered businesses while in government, are now doing everything in their power to undermine UK plc from the Opposition Benches.
I note that the Government have taken steps to improve the clarity of the legislation with regard to seasonal work, introducing measures that will ensure that businesses relying on seasonal work and bodies representing seasonal workers will be properly consulted when secondary legislation is drawn up. Many businesses, such as those in the farming and agricultural sector, as well as thousands of pubs, cafés and restaurants, depend on seasonal workers, and any obstacles to hiring them could have a significant impact, exacerbating the long list of challenges they already face, so we must ensure that they are supported as much as possible. Small businesses in our local towns and communities are struggling with the Government’s unfair national insurance rise, high export costs due to Brexit red tape and a business rates system that is not fit for purpose. Struggling businesses mean fewer jobs and lower pay, so it is vital that we take steps to support high street businesses and all those who rely on them.
It is time that we listened to the business community, which is telling us that the best way forward is to look for balanced solutions through secondary legislation and to put an end to the uncertainty and avoid losing the six-month qualifying period, which we were happy to have helped secure. Continuing to delay the passage of the Bill at this late and protracted stage would risk further uncertainty for businesses, particularly small and medium-sized enterprises, and would jeopardise significant changes that will benefit workers, such as expanded protections against workplace harassment and improved paternity leave rights.
I urge Members to be pragmatic and to provide clarity to businesses and workers alike regarding an implementation timeline. That is critical for providing a stable operating framework so that businesses can plan ahead. We should now work together to ensure that this legislation can be implemented to benefit businesses and workers alike.
Lee Barron (Corby and East Northamptonshire) (Lab)
I start by pointing out my proud membership of the Communication Workers Union, just so I can get that on the record. Before I get into the issues with the amendments, I want to say that enough is enough. Unelected Lords must not get in the way of the democratic will of the people and the manifesto commitment to deliver this Bill and make work pay. My constituents have waited long enough, worked long enough and put up with it for long enough. Every delay means someone going to work ill. Every delay means another zero-hours week. Every delay means that, once again, someone gets away with bad practice.
The Lords amendments talk about a cap, but we have been here before. We have lifted caps before. Caps on compensation do not exist in cases of discrimination claims. There is no evidence to suggest that they have all of a sudden got out of control or gone absolutely mad —they have not, so we have been here before. We have lifted caps before to turn things around and send a clear message about what we want to build.
On the proposal to cap the fine for denying access to trade unions at £75,000, what sort of a cap is that? What would that do to global giants? We saw what Amazon did to the GMB to frustrate its organising. Why should we allow big businesses to pay to break the law? Frankly, we should not.
On guaranteed hours, there must be no loopholes and no cutting hours for a few weeks to dodge the law. We need a simple 12-week test, with a simple average of hours. That is fair, clear and enforceable.
This Bill is about common sense at work. If someone is sick, they should not be dragged into poverty; if they work regular hours, they should get a proper contract; and if they are unfairly treated, there should be consequences. This Bill was promised and voted for at the election; this Bill should now pass.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
We are addressing the specific issue of the removal of a limit on the cap. Of course, while this will have a big impact on businesses, it will also have a huge impact on our public sector. Large organisations that employ significant numbers of high-paid professionals, such as the NHS, will see their insurance costs driven up significantly by this measure, so it is all the more surprising that no consultation or impact assessment is before the House when we are asked to make the decision this evening.
We must reflect on the real-world impact of this measure, alongside the package of measures in a Bill that worthily deserves to be scrapped in its entirety. One of the proudest achievements of the last Conservative Government was that when we left office, youth unemployment was half what we inherited from the previous Labour Government. A huge share of those 4 million new jobs went to younger people. Today, the number of young people not in education, employment or training has hit over 1 million. The Resolution Foundation said, on this issue specifically, that
“young people are bearing the brunt of Britain’s jobs downturn”.
Most of us will have heard from businesses in our constituencies that all the measures in the Bill are significantly raising the barriers to entry for new workers into the market at a time when there is a double whammy. Our demographics as a country make it much harder to recruit them compared with older, more experienced workers, simply because there are fewer young people in our population. Imposing new measures like this that make it more expensive and harder for young people to get their first foot on the ladder is a dereliction of our duty to our economy. We must not forget that for our young people, many of whom we hope will end up as those high-paid professionals, getting and keeping a job is the thing that is most important in their lives—to their health, their mental wellbeing, their wealth and their long-term life prospects. In addition, it is our economy that pays not just for those people’s wellbeing, but for the public services on which so many other people depend.
In conclusion, while the whole Bill deserves to be scrapped—it is shocking to see the craven capitulation of the Liberal Democrats, rather than fighting the corner of British workers—let us at least vote to support this small change that has come from the other place. Let us show that somebody in this Chamber is on the side of jobseekers, wealth creators and those who will create future opportunities for our economy, our country and our people.
Mark Sewards (Leeds South West and Morley) (Lab)
I will be brief. I proudly refer members to my entry in the Register of Members’ Financial Interests. I am a proud member of several trade unions, and have indeed received money from trade unions to remove the Conservatives from power.
Speaking of removing the Conservatives from power, on 4 September I proudly voted, along with the vast majority of people in this House, to remove hereditary peers from the other place. I did so because I do not believe that individuals should be able to shape our laws purely because of the families they were born into. Whatever the arguments put forward on the Bill’s amendments, we are here today because hereditary peers stopped the progress of the Bill through the other place. The simple fact is that if we were to remove the hereditary peers who voted—
Madam Deputy Speaker (Caroline Nokes)
Order. We are not debating hereditary peers; we are debating the amendments to the Employment Rights Bill.
Mark Sewards
Thank you, Madam Deputy Speaker. The votes in the other place serve only to strengthen my resolve that we must get the Bill through Parliament and strengthen the rights of workers.
David Reed (Exmouth and Exeter East) (Con)
When I look to the other House, across the political divide I see captains of industry—people who have led businesses small and large. Does the hon. Member see any merit in their arguments?
Mark Sewards
We will always pay attention to the arguments made in the other place, but I place more credence on the arguments made by life peers—people who have been appointed because of their expertise and not because of the family they were born into. However, I appreciate that that point has been well made, Madam Deputy Speaker, and I will move on.
Along with the fact that the Government have already compromised in good faith on the Bill with trade unions and businesses, and that those businesses and their representative organisations have welcomed what we have put in the Bill and called on us to pass it today, we were elected on a promise to get this Bill passed into law. Fire and rehire must be banned. Exploitative zero-hours contracts must be ruled out. Day one rights for parental and bereavement leave must be rolled out, and sick pay must be improved. Whichever way the House votes on these amendments today, I implore the hereditary peers in the other place to do the right thing, get out of the way, let this Bill pass and make work pay.
Bradley Thomas (Bromsgrove) (Con)
The impacts of the Bill in its current form are already being felt: 71% of businesses have raised serious concerns, with over 90% of small business owners expressing deep worries, resulting in 67% of companies preparing to halt recruitment. We already know that the Government do not understand business. That has been demonstrated clearly through the string of damaging policies trailing behind them, from the national insurance changes that are crippling the hospitality sector to the family farm tax that is undermining our national food security. Aspects of this Bill are no exception, the prime example being the complete removal of the employment tribunal cap on unfair dismissal compensatory awards.
As of June 2025, 515,000 open claims were in the system, and the numbers continue to rise. The employment tribunal system is inundated. It is overwhelmed and debilitated by cases, leaving thousands facing intolerable delays. Rather than addressing the issue through action that would significantly help working people—
Michael Wheeler (Worsley and Eccles) (Lab)
I wonder whether the hon. Member accepts that, as a number of colleagues have drawn to the House’s attention, the current system has a perverse incentive that pushes people towards a more complicated tribunal system that seeks to identify discrimination, rather than a simpler system of unfair dismissal, because of the cap. This measure is more likely to keep claims within the simpler, more streamlined and quicker system of unfair dismissal, thereby helping with the very problem that we all accept is real.
Bradley Thomas
I was just about to get to the point that I wanted to make: removal of the cap will make matters significantly worse. To put it plainly, it will open the floodgates for senior executives to pursue multimillion-pound claims that will further congest the courts. For many companies, the dismissal process for senior executives is fundamentally different from that used for other employees, in many cases as a result of strategic complexities relating to board involvement. Unlike the structured procedures applied to the wider workforce, senior leaders are seldom afforded opportunities such as performance improvement plans before removal. The Bill creates a significant liability and establishes a direct financial incentive for senior executives to pursue employment claims.
Paul Waugh
Is the hon. Gentleman aware that, at the moment, compensation for racial, sexual and disability discrimination, and for whistleblowers, is uncapped? What is the difference between that and being unfairly dismissed?
Bradley Thomas
The hon. Gentleman misses the point that I am making. Currently, there is no financial incentive for very senior executives who cannot exercise any leverage over things such as pay and equity, and the Bill risks clogging up the system. The CEOs of large UK corporations earn a median salary of over £4 million, compared with the £118,000 cap on unfair dismissal claims, so high earners have little incentive to lodge claims. Remove the cap and that incentive becomes glaringly obvious.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
Will the hon. Gentleman give way?
Bradley Thomas
I will make progress.
The idea that removing the cap will lead to anything other than a surge in cases is pure fantasy. This lack of understanding shows why the Government must listen to those who know how business works and recognise the devastating consequences that the Bill will have for companies and, crucially, for workers, rather than branding themselves champions of working people while advancing policies that benefit only high-fliers.
Graham Stuart
Labour colleagues shake their heads as my hon. Friend lays out the blindingly obvious. That goes to show why introducing a measure at the last minute during ping-pong is inappropriate and precisely why the House of Lords is right to say that we must consider this fully. It is quite obvious that Labour Members do not want to understand it; they obviously do not understand the implications.
Bradley Thomas
I thank my right hon. Friend, who makes his point eloquently, as usual.
The Government must abandon the measure. If they are really on the side of workers, the best thing they can do is abandon this measure—and abandon the Bill in its entirety.
Laurence Turner
I am grateful to have been called to speak in this debate. I draw the House’s attention to my membership of the GMB and my chairship of its parliamentary group—an unremunerated role.
The Bill has been the subject of 14 months of debate and scrutiny, and it should have received Royal Assent months ago. Let us not beat around the bush about why we are here tonight: the Bill has been deliberately delayed by some Members of the other place who disagree with the principle of what it seeks to achieve and with the electoral mandate behind it. The amendment that came from the Lords last week represents the last gasp of that approach, testing the limits of the democratic decision-making process and the constitutional relationship that binds these two Houses. This is no longer solely about workers’ rights; it has become a challenge by unelected peers to the primacy of the Commons and the greater legitimacy that our constituents lend us temporarily.
Sir Ashley Fox
Twelve months ago, the hon. Gentleman and I sat on the Bill Committee. This is the first time that the Commons has had the opportunity to debate this measure, courtesy of the House of Lords. The Lords have done us a favour, haven’t they?
Laurence Turner
I enjoyed many hours in proximity to the hon. Member. He will know that the only reason we are considering the measure in such a short time is that the Bill has been delayed, so close to the April implementation period, because of the Conservative party.
The final proof of the implications of the constitutional limits of what we are now being asked to consider can be found in the fact that the Opposition’s amendment was carried last week thanks to the votes of Conservative hereditary peers, who owe their positions to an accident of birth.
Mr Joshua Reynolds (Maidenhead) (LD)
Does the hon. Gentleman understand that his Government are yet to abolish the hereditary peers—
Madam Deputy Speaker (Caroline Nokes)
Order. We are not having a debate on hereditary Members of the House of Lords. We are debating the Lords message on amendments to the Employment Rights Bill.
Laurence Turner
If the Lords amendment were not rejected, it would have two immediate effects. First, it would collapse the agreement between employers and union representatives. It is not some reasonable call for a review; it strikes out the changes to the compensation cap, which was a key component of that agreement. The Conservatives know that it is a nonsense to call for a review if the legislation that would give it effect is not carried—[Interruption.] Secondly, the amendment would so delay the Bill that April’s extension of statutory sick pay and parental leave for millions of people—some on the very lowest incomes—falls into doubt.
Dr Luke Evans
I was listening carefully to the hon. Gentleman, but he tailed off when he was talking about a problem, and it did not quite go through. I think that he was talking about the fact that there would be a delay because of the consultation. In 1999 and 2015 there were consultations on the very issue of a cap. Why have the Government not done that?
Laurence Turner
If the hon. Gentleman had been listening carefully, he would know that I was referring to the review called for in the Lords amendment. That is not all that the amendment contains; it seeks to strike out the powers to change the compensation cap. It is a nonsense to say on the one hand that the Bill must be halted in its track while there is a review, when the powers in question have been removed.
The delays to the April implementation of fundamental rights cannot be suffered. As the employers’ representatives have said, we are out of time. The opposition to the Bill is exhausted, and the Commons mandate must be respected. Parliament must pass the Bill.
Jerome Mayhew (Broadland and Fakenham) (Con)
We are short on time, so I will limit myself to two points.
I will start with what my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) admirably described as the “craven capitulation” of the Liberal Democrats. Just a week ago, the Liberal Democrats were arguing passionately about unions’ abilities to cause strikes, and about the right to guaranteed hours. Then what happened? Five peerages came along. Now they are in favour of those things. It used to be the case with their last Prime Minister, Lloyd George, who famously used to sell peerages for money. Now it seems that the Liberal Democrats sell their principles for peerages.
Sarah Olney
On a point of order, Madam Deputy Speaker. I think that is disgraceful. The hon. Gentleman is literally implying corruption. I made it very clear in my speech what the basis of our change in support in the Lords was for, and I think it is intolerable that we are being accused.
Madam Deputy Speaker (Caroline Nokes)
I thank the hon. Member for her advice. As it happens, she makes a good point. The hon. Member for Broadland and Fakenham (Jerome Mayhew) should not be suggesting any particular motive attributed to that issue, and could he perhaps confine his remaining comments for the next 90 seconds?
Jerome Mayhew
I am grateful for that direction, Madam Deputy Speaker.
Let us move to Lords amendment 120N. This is a major new policy. We do not have to argue about whether a £118,000 cap is a good or bad idea. I think the cap is a good idea, but the amendment seeks to clarify the process by which the Government have decided to impose this measure in the Bill. It was not part of the manifesto. It was not part of the Bill or discussed in the Bill Committee. It has just been inserted at the last moment in ping-pong. There has been no risk assessment, no impact assessment, and no consultation. The amendment does not put the Government off course. All it asks the Government to do is, within three months of Royal Assent,
“conduct a review of the limit imposed by this section on the amount of the compensation awarded”.
That consultation only has to consult employers’ organisations, trade unions—one would think Labour Members would be in favour of that—and
“organisations representing employment law practitioners, and such other persons as the Secretary of State considers appropriate.”
If the Government choose to implement policy on the hoof, the least they can do is undertake a consultation that they should have carried out—
Kate Dearden
I am grateful to hon. Members across the House for their contributions today and throughout the passage of the Bill. When there is a finding of unfair dismissal at tribunal, it is important that the claimant is fairly compensated for the loss they have suffered. We also believe that the cap on compensatory awards for unfair dismissal incentivises claimants to construct complex cases that allege both unfair dismissal and discrimination so as to access uncapped compensation, as I stated in my introductory remarks—perhaps Conservative Members did not hear that. By removing the compensatory award cap for unfair dismissal claims, that incentive will be lessened.
By removing the cap, the Government will also deter employs from treating the cost of dismissing employees unfairly as part of business as usual, instead ensuring that employees who face significant losses as a result of being unfairly dismissed are fairly compensated. Compensation for unfair dismissal is awarded only where a tribunal finds in favour of the claimant. Claims that do not have merit will not secure any compensatory award with or without a cap.
Lifting the cap will not mean that compensatory awards start from a blank sheet of paper and become impossible to anticipate. Tribunals have well established ways to calculate the compensation that might be awarded for particular types of losses resulting from unfair dismissal. I thank the Liberal Democrat spokesperson, the hon. Member for Richmond Park (Sarah Olney), for her support. As she referenced, and as Members will have heard in my introductory remarks, we will publish an economic assessment in due course, and I am always available for further discussion.
Conservative Members have opposed this Bill at every stage, and no matter what the issue was today, they would oppose it again. Businesses and unions have shown leadership, and Conservative Members and Parliament should respect their voice. The tripartite agreement was forged through dialogue with those who live the realities of our workplaces every day. That agreement included a package conducted in good faith and with good will, and I thank them for it.
This Government’s aim is clear: to conclude the passage of the Bill so that millions of British workers gain new rights while businesses can prepare for change with certainty. Labour Members send a clear message to the other place to now let the Bill—a Bill that delivers on multiple manifesto commitments and has a clear electoral mandate—pass. Any further delay risks leaving workers without protections and businesses without clarity. We now strive to conclude this process and deliver the change that Britian needs to make work pay. We cannot build a strong economy with people in insecure work. We are strengthening the foundations of our economy and improving living standards. The Bill, and all our work across Government, is the foundation for building an economy that works for everyone.
Question put.