Employment Rights Bill

Baroness Neville-Rolfe Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

There is some good stuff here and there is potential, but there is also risk. I hope that, after we have progressed through the amendments, we can send legislation back to the other place that is in better shape than it is today.

[Baroness Neville-Rolfe (Con)]

My Lords, I am speaking from the Back Benches to make two brief points. I apologise for not speaking at Second Reading.

First, if we have to have a purpose clause—it is not an approach that I particularly favour—it has to include a reference to competitiveness, growth and perhaps, as the noble Baroness, Lady Carberry of Muswell Hill, has suggested, productivity. Does the Minister agree?

Secondly, like my noble friend Lord Hunt of Wirral, I am shocked at the number of government amendments made to the Bill at such a late stage, and to legislation that is so important to all parts of business, all employers in the public sector and of course all employees, and their representatives, whom the noble Lord, Lord Monks, rightly referenced.

I have some sympathy for the Minister. I had a similar experience with the Procurement Act, although it was not quite as bad because we had consulted extensively, and it was a Lords starter. But like this Bill, it was introduced before it was ready and needed a large number of amendments. As the responsible Minister, I was very keen to listen to criticism of the detail and respond by agreeing to amendments or tabling government amendments that responded to the genuine difficulties, and I think there are genuine difficulties with this Bill. We worked across the House very well and I hope the noble Baroness will consult her Front-Bench colleagues, the noble Baronesses, Lady Chapman and Lady Hayman of Ullock, who engaged constructively in scrutiny on all the procurement detail.

Another good example is the minimum wage legislation referenced by the noble Baroness, Lady O’Grady. I remember when I was at Tesco persuading the then Labour Government that they should not include a requirement to put the national minimum wage on all payslips. It was going to cost us millions and require a change in our IT systems. Labour listened and the implementation of the Act went more smoothly as a result. It is very important to listen to the practicalities when making these changes. They can affect different parts of the Bill in different ways.

Finally, we have heard a lot about Europe and comparisons with Europe. I have spent a lot of time in Europe, but I would be interested to hear also about what is going on in the growing markets of Asia and—I suppose until more recently—the growing market of the United States.

[Lord Evans of Rainow (Con)]

My Lords, I will speak briefly to Amendment 1 from the noble Lords, Lord Fox, Lord Sharpe and Lord Hunt. Paragraph (c) would

“make provisions about pay and conditions in certain sectors”.

My noble friend Lady Stowell of Beeston made some very good points about the tech sector—those entrepreneurs and businesses of the future. It was very important to hear what she had to say. However, I wish to stand up for the hospitality sector. Do any of the Members opposite know what it is like to run a hospitality sector business and the challenges of employing people to cater and serve in that sector?

UKHospitality recently launched the social productivity index, which shows that the hospitality sector is also a key driver in socially productive growth, not only contributing to economic expansion but fostering social mobility and regional development. With 57% of the workforce working 30 hours or fewer per week, the sector offers flexible employment options that make it particularly accessible to students, carers and parents—I do not know how many noble Lords in this Chamber today at some stage in their career worked in hospitality, but it is an excellent first opportunity to get into the world of work.

Unfortunately, in broad terms, the proposed changes in the latest set of amendments to the Bill seem destined to result in a framework of requirements that are more likely to hinder than to promote growth in the hospitality sector. In particular, without further addressing the concerns of businesses and considering alternative options, it is felt that the Bill is likely to lead to reductions in staff recruitment, the rate of wage growth and the level of investment. The Bill looks likely to hinder hospitality businesses and restrict growth. It seems to assume that all employers are bad actors with regards to their dealings with their staff. This is patently not the case for the majority of businesses, which recognise the need to recruit and retain staff and ensure they are supported and secure at work.

There still appears to be a disregard for seasonal business models and unpredictable trading in sectors such as pubs and wider hospitality businesses, which are required to adapt quickly to changes in trade patterns determined, for example, by weather or other events outside their control. A reduction in businesses’ ability to respond quickly and proactively to changing demand will undoubtedly result in higher operating costs. That will naturally need to be met by either increasing prices, reducing other staff costs or reducing investment.

These impacts are compounded by the Budget announcements on employer NICs and national living wage rates. Spiralling employment costs will be exacerbated by the additional cost and administrative burdens that the Bill will layer on top, all impacting investment and growth. The unintended consequences of this Bill are slower wage growth and recruitment. I am sure the Minister does not intend that to be the case. Can she reassure the Committee that it will not be the case if the Bill goes ahead as it is?

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[Baroness Jones of Whitchurch (Lab)]

Obviously, we want all sectors to have the right facilities for them. I am not sure whether the noble Baroness is talking about home care or the care home sector. Perhaps we can have a conversation outside; I will attempt to set up a meeting with her, because I do not want to be misconstrued.

Amendments 10 and 31 seek to amend the Bill so that agency workers do not have a right to guaranteed hours. We are determined to ensure that agency workers who seek more certainty of hours and security of income are protected. Some workers choose agency work because they value flexibility, but they can also experience one-sided flexibility in the same way as other workers. Failing to include agency workers in the scope of the Bill could also see employers shift to using more agency workers to avoid the zero-hours measures altogether. As with other eligible workers, agency workers who prefer the flexibility that agency work provides would be free to turn down the guaranteed-hours offer.

After public consultation, the Government brought forward amendments to the Employment Rights Bill so that hirers, agencies and agency workers are clear where responsibilities will rest in relation to the new rights. However, we recognise that some measures may need to apply in a different way to agency workers because of the tripartite relationship between the end hirer, the employment agency and the agency workers. The Government will consult further and continue to work in partnership with employers’ organisations, the recruitment sector and trade unions to develop the detail of regulations in a way that avoids unintended consequences for employment agencies and hirers.

Amendment 32 seeks to remove from the Bill the power to place the duty to make a guaranteed-hours offer on the work-finding agency, or another party involved in the supply or payment of an agency worker instead of the hirer. We included this power in line with the responses to the Government’s consultation on applying zero-hours contract measures to agency workers. Responses from stakeholders were split about whether this new duty should lie between the hirer, the agency or another party in the supply chain. We are clear that, as a default, the hirer should be responsible for making the offers of guaranteed hours because they are best placed to forecast and manage the flow of future work.

However, given the unique and complex nature of agency worker relationships, which vary in different parts of the economy, the power is required to allow the Government flexibility to determine specific cases in which the responsibility to offer guaranteed hours should not sit with the hirer. For instance, this could be the case with vulnerable individual hirers who receive or procure care from agencies—I am not sure whether that is the point to which the noble Baroness referred earlier—where instead the agency might be in a better position to offer guaranteed hours. We are aware of the importance of this power and the impact these regulations could have on agency workers, hirers, agencies and others in the supply chain. For this reason, this power will be subject to the affirmative procedure, ensuring both Houses of Parliament get further opportunity to debate its use.

[Baroness Neville-Rolfe (Con)]

Can the Minister talk us through the agency question a little bit more? If you need emergency care, you go to an agency and it finds you someone, then you pay a very large sum of money for agency care. Is the Minister suggesting that in future, and considering the ups and downs, the agencies will have to guarantee those who are involved in emergency care these very high salaries, which they will have to pay, even if they do not find clients? Is that how she thinks it will work out in practice? Is it enough to say it is going to go into regulations, when this is so important for the care sector and emergency care?

[Baroness Jones of Whitchurch (Lab)]

I was making the point that this has complications because there are some people who are individual hirers. Some people get benefits to employ people directly, so it is not always done through a third party. That is why we need to have clearer rules about this. I am happy to write to noble Lords or explain this in a little bit more detail if that helps.

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[Lord Leigh of Hurley (Con)]

My Lords, it is a great honour to follow my noble friend Lady Noakes and the noble Lord, Lord Londesborough. My noble friend and I worked on the Small Business, Enterprise and Employment Act, which I am pleased has provided good use here on in. Of course, she has a most distinguished business career, not just, as we all know, in very large financial services companies but as my president at the Institute of Chartered Accountants, where she interacted with many small and medium-sized businesses. The noble Lord, Lord Londesborough, and I spent the turn of the year discussing the Bill and its ramifications.

I speak as someone who takes a particular interest in SMEs, for reasons I will explain. I am, of course, in full support of this small group of amendments—as are, I think, all business representative bodies. The FSB, which is the UK’s largest employer group, has said that this will

“wreak havoc on our already fragile economy”.

We have had survey after survey: 1,270 companies were surveyed. Two-thirds of them said that they will curb hiring, and one-third said that they would reduce staff as a result of this Bill. The aforementioned Chartered Institute of Personnel and Development discovered that 25% of its members will be considering lay-offs as a direct result of this Bill. The Institute of Directors called it

“a sledgehammer to crack a nut.”

As I mentioned, I am particularly close to the SME sector, not least because, in 1989, I started a small business with one partner and one assistant. I should therefore declare an interest that I still own a chunk of shares in that small business, which, when we started, was called Cavendish Corporate Finance and is now Cavendish plc. At this point I normally take a pot-shot at the Labour Front Bench as not having any business experience to talk of—certainly not in the other place—but I have to be much more deferential in this Chamber, not least because the noble Lord, Lord Leong, two years after I started Cavendish Corporate Finance, started Cavendish Publishing, except, of course, that he had much greater success than me. According to Wikipedia, in his first year made £250,000 profit, which is very impressive, because in my first year I lost money, so I have to be suitably deferential. None the less, I am sure the noble Lord will remember those formative years of starting a business, when one was focused on nothing else but that business. Clearly, we desperately need people to do the same as the noble Lord and me: to take the risk, start a business, have a go and then employ people.

The decision to employ a person is a very big one. It is the toughest decision for the first person, but it is still tough for the second, third, fourth and fifth. As it happens, we now have 220 people employed at Cavendish, but it took a long time to get there and we had to merge with a number of other companies so to do. For many years my small business would have been covered by my noble friend Lady Noakes’s exemption, and it would need it because, to take on people in a small business, you are recruiting someone not just to do a job of work but to join your culture and your aspirations, and to fit in. Sometimes it works and sometimes it does not, and when it does not you have to make difficult decisions to make changes. The fact that we are now allowed to let people go relatively easily encourages people such as me to take a chance and employ someone where I would not otherwise do so.

I am very worried that this Bill will lead to a reduction in business growth and, in particular, in employment. Its main burdens will be borne by small businesses. I think the Minister cited five companies that she said were broadly supportive of the Bill. All but one were larger companies, and one was actually the Co-op—I am not sure that entirely counts. Another was IKEA, but I would be very grateful if the Minister could cite the support from IKEA, because I cannot find it. The SME sector realises that the financial burden that the Bill imposes of some £5 billion will largely fall on it, and it is very worried. So the first issue is financial.

The second issue is operational. SMEs do not have an HR department. They simply do not have the facility to wade through this enormous amount of legislation about how they are supposed to treat their staff. The only way round it is, of course, to deploy an agency at great expense to advise and consult every time there is any HR issue, and it is just another cost for businesses which are, for the most part, feeling pretty fragile, and much more fragile after the horrendous NIC increases that are being imposed on them.

The third hammer blow is that those business just will not hire. They just will not take the risk of hiring new employees, which will, of course, restrict their growth, because the only way a business can grow is to recruit new people with fresh blood, fresh ideas and fresh reach. It is impossible for a business to grow without making hires.

Fourthly, the Bill will make businesses risk averse. The Institute of Chartered Accountants in England and Wales has specifically said that this will make businesses risk averse in all their decisions, because of the extra risks that are imposed on those businesses by the Bill because of the costs and burdens they have to undertake.

Lastly, the fifth problem with the Bill is the lack of consultation. It has been rushed through to meet the 100-day deadline and, as a result, there has not been proper consultation and we are wading through a vast number of amendments that we are trying to get our heads round.

For all those reasons, one accepts that the Bill is in the manifesto and that it has to happen—it is in, in many ways appropriate that it does—but please can we leave out the SME businesses that will struggle with this Bill? Maybe we can bring it in later, suitably amended, but not now.

[Baroness Neville-Rolfe (Con)]

My Lords, I think the Government would do themselves a great deal of good if they made special arrangements for small business. They are well precedented: we have the VAT threshold, the employment allowance and the small business audit, and it would be a powerful addition to their forthcoming White Paper or Green Paper on small businesses.

Everyone knows that I often speak in favour of small business and have very good relations with the Federation of Small Businesses, so I obviously support the expert trio of my noble friend Lady Noakes and the noble Lords, Lord Londesborough and Lord Vaux of Harrowden, who we should listen to. To put it simply, either we need some special arrangements for small businesses, or—and it might be even better—we need changes to the Bill to remove the bureaucratic provisions that are going to get in the way of success; to look at the lack of flexibility and remedy it; and to avoid the inevitable huge increase in tribunal cases and the overuse of delegated powers. I encourage the Minister to think creatively in this important area.

[Baroness Verma (Con)]

My Lords, I also support these amendments from my noble friend and other noble Lords. It would be really helpful if the Government took a hard look at this. I spoke to coffee shop owners over the weekend, and to a very small business that is trying to manufacture British products in this country. They are all very worried about how they are going to cope with the burdens that will be placed on them.

It may well be useful for the Government to go back and look at whether they can make an exception for small businesses up to a certain number of employees—maybe three, maybe five and at least for those that have no ability other than to reach out and pay for very expensive advice, which often they cannot afford. These small businesses are at the heart of our high streets in local communities. They add value and are familiar to customers. The very small business—the micro-business, but particularly businesses with 10 employees or less—should be exempt from this Bill.

Collective Investment Schemes (Temporary Recognition) and Central Counterparties (Transitional Provision) (Amendment) Regulations 2024

Baroness Neville-Rolfe Excerpts

Monday 18th November 2024 Grand Committee

[Baroness Kramer (LD)]

My Lords, I will be relatively brief because these are highly technical instruments, but there are some comments that I would like to make.

I shall start with the collective investment schemes and central counterparties order and begin with collective investments schemes. I ran this one by my noble friend Lady Bowles of Berkhamsted, who is the ultimate guru in our party on collective investments schemes and, I suspect, one of the experts on them within the House, and her report was “It’s absolutely fine, let it go”, so I will happily take that position on the necessary tidy-up of the changes in the language for collective investment schemes.

However, the second part of that order is far more interesting and raises some questions, about not the language but the broader issue of central counterparties and the hint that this regulation may contain. Everyone in this Room understands that central counterparties became an instrument for countering the fallout of the 2008 financial crash when liquidity seized up across the financial services sector because, within that huge area of derivatives—I think derivatives outstanding typically exceed something like $60 trillion at any one time—the outside world did not know who owed what to whom and therefore who was at risk from which failure and whether there would be domino effect. Indeed, liquidity then seized up and we went from a contained financial crisis into a wholesale financial crisis. Now, vanilla transactions and derivative arrangements that go beyond the vanilla pass through central counterparties so that there is a middleman, if you like, that can hold the risk so that if one party fails, the counterparty takes the risk, not the person who holds the mirror transaction on the opposite side.

I think everyone has always recognised—I could quote Andy Haldane, but I have done it too often before—that, in a sense, the central counterparty is an accumulation of risk. One could almost think of it as an unexploded bomb. Serious levels of risk are contained with the central counterparty and, if anything goes awry, the shock to the financial system would be global. The Committee will know that many of the counterparties share common ownership. They may look like completely separate organisations, but they feed back and the same parties, in a sense, make up their various memberships and ownerships. Cross-contamination is always a huge risk when dealing with central counterparties.

It is obviously sensible now that, sadly, we have left the EU, that regulation which tied into EU directives should drop away, but I am concerned that this does not become an excuse for playing the game of regulatory arbitrage. We hear constantly about the significance of growth. I do not deny that, but I am concerned about the gradual understating of risk that sits alongside loosening and changing regulation to create the animal spirits that will create growth.

The potential to play a regulatory arbitrage game around central counterparties must be raised in this context. When we required recognition by more than one regulator—ESMA as well as its UK equivalent—we had the constraint of two sets of significant eyes looking at a particular situation. Now there is one set of eyes only. While we always acclaim the importance and, as I often hear, the great superiority of the British regulators in this area, I would very much like some assurances that there is at least some degree of oversight and monitoring in recognising the potential of trying to loosen up regulation around the central counterparties.

Both prior to our exit from the EU and today, the dominant European clearing house—one might say the dominant global one—was LCH. It is no longer called the London Clearing House and its party in Paris is now known as LCH Paris. It is still dependent for about a third of its clientele on recognition from ESMA. ESMA has given it temporary equivalence, but that could be adjusted or changed in future and there could be limitations on European institutions from doing more than a certain percentage of their clearing through LCH or other UK clearing houses. Can the Minister update us on that issue? Is there any sense that the steps we are taking could trigger a more adverse decision from ESMA in reference to UK-based CCPs?

I will very briefly deal with the insurance distribution regulations. Some in this Committee will know that I hate the concept of a regulatory perimeter whereby we regulate activities on one side but not on the other. I gather from the Explanatory Memorandum that some companies which were outside the regulatory perimeter will now be drawn inside it. That can be only a good thing, but there has always been a tendency for companies in the UK to game the regulatory perimeter. They grow to a size that puts them just outside sight of the regulation. Will a significant number of companies be affected by this adjustment in denominating the assets from euros to sterling? Will we see a cluster around the regulatory perimeter and have any concerns been triggered in looking at this set of changes?

[Baroness Neville-Rolfe (Con)]

My Lords, I take great pleasure in returning to the Front Bench to debate Treasury matters, albeit now in a shadow capacity. Although I do not have current interests to declare, I hope that my past experience as Commercial Secretary to the Treasury and as a member of the EU Financial Affairs Sub-Committee will stand me in good stead. Until 2022 I served as a non-executive director of a challenger bank and, of course, I have served in business more generally. I thank the Minister for her clear explanation of these two instruments and their obvious complexities. I am glad of the opportunity to work with her across the House and I look forward to hearing the answers to the observations made by the noble Baroness, Lady Kramer, especially about risk.

Our investment schemes and central counterparties are without question the backbone of the United Kingdom’s financial services industry. They enable our country to attract global capital, support pensions and, ultimately, benefit people and businesses up and down the country. As the Minister said, it is important that the rules and regulations are not needlessly bureaucratic. The removal of EU recognition is welcome. We now have domestic arrangements for oversight and I believe we should not be double-banking, so I am in a slightly different place to the noble Baroness, Lady Kramer, on that.

I wish to make two wider points. I am particularly grateful to the Minister for including a de minimis impact assessment with the first SI. I note that it has also been through the better regulation unit. I have always been a huge supporter of impact assessment and wider cost-benefit analysis of all legislation, but I have two questions. Can the Minister confirm that it is the policy of the new Government to require de minimis assessments of this kind on all SIs—unless the impact is negligible, as with the insurance distribution SI? She can perhaps answer for the Treasury today. I note from GOV.UK that her ministerial role also relates to business regulation more widely. Although she may need to write, I would appreciate a wider answer, as such a requirement would help deliver value for money across government and limit the negative effect on growth of new regulation.

My other concern is the glacial pace at which we are leaving the EU financial services regime behind. The collective investment SI provides for a year’s extension of a temporary regime. Although this may be well and good for the reasons the Minister has clearly explained, I have no idea when the UK will have completed the task of replacing EU financial services law with our own. I was trying to advance this process in 2017 when I was at the Treasury so that we would be ready when Brexit day arrived; as it happened, it did not arrive until January 2020. I believe the transition was well debated during the passage of the Financial Services and Markets Act 2023, but I have two other related questions. Do the Government, with the help of the regulators, have a plan for completing it and taking advantage of any new freedoms and simplifications that are now possible? Will the Minister agree to send me a list of the missing regulations and a timetable?

Although it is a demand, I mean that as a constructive question. Our financial services sector is so important to UK growth, and we need to make sure that these changes are completed, take effect and help our financial services sector, which has so much to contribute to UK growth, productivity and prosperity. Having said that, I am very happy to support the two sets of regulations.

[Baroness Jones of Whitchurch (Lab)]

I thank both noble Baronesses for their comments. I very much welcome the noble Baroness, Lady Neville-Rolfe, to her new role—I am sure that she will carry it out extremely well. I am pleased to hear that the noble Baroness, Lady Bowles, approves of something we are doing, for a change. Getting approval from her takes some doing, so it is good to hear.

The noble Baroness, Lady Kramer, made some more serious points, which I will have a go at addressing. First, she asked whether risk was being compromised here. We agree that we do not want to deregulate in this area; if anything, the UK Government have committed to maintaining and strengthening our high standards for CCP regulation. Of course, the Bank of England regulates these firms anyway, in accordance with its financial stability objective, so there are checks and balances already in place. We do not believe that risk is being compromised. On equivalence being a unilateral decision for the EU, we have been clear that we are committed to high standards and that we do not believe this SI gives the EU any cause for concern or reason not to extend CCP equivalence further.

The noble Baroness, Lady Kramer, asked about the role of ESMA. Of course, a variety of circumstances could lead to ESMA withdrawing EU recognition from overseas CCPs. These circumstances may not always be relevant to the UK; therefore, UK authorities may not wish to take similar action. This might be the case if, for instance, ESMA withdrew recognition because it had not agreed co-operation arrangements with other relevant national authorities. Whatever the reasons for withdrawing, the Bank is able to remove a firm from the TRR, if it deems that the CCP presents a financial security risk.

The noble Baroness also asked whether insurance companies would fall outside the regulatory perimeter. There is no policy change here. Premium thresholds will be denominated in sterling rather than the euro. The current exchange rate was used, with denominations rounded to the nearest £25; this is just to make it easier and clearer for people using the services. We will keep the operation of these thresholds under review, but this measure was simply to make the process more simplified.

I thank the noble Baroness, Lady Neville-Rolfe, for her welcoming of many of the proposals before us. She asked about impact assessments. They are standard practice; if we do not have an impact assessment, there must be a very good reason why that is the case. The noble Baroness will know from her past experience of the sorts of cases where that might occur. These measures are all covered by the better regulation framework anyway, if the impact is more than £10 million—so we think that, one way or another, they are covered.

The noble Baroness asked about us taking out all references to the EU. All I can say is that that is a work in progress. We would probably like to do it more quickly than we are, but we are working on it. We are looking back at the legislation. The purpose of this particular piece of legislation was to make it clearer to people. I do not think there is a legislative danger in the current wording, if it already exists in other bits of legislation; this was just to avoid confusion. We all want to do that, of course; where we can, we will. If we revisit bits of legislation in any way, that will be an ideal opportunity to correct these references so that they do not cause confusion in future.

I have a feeling that I probably have not answered all the questions asked by the noble Baroness, but that is my best stab at it. I thank both noble Baronesses.

[Baroness Neville-Rolfe (Con)]

My question about the impact assessment was actually about the de minimis impact assessment. Proper impact assessments have to be done at about £10 million, or whatever the level now is, but I was congratulating the Minister on having done an impact assessment for something that was in effect smaller. I would like to know whether that will be adopted by the Treasury, which I think has an interest in it, and whether it will be adopted more broadly by other departments. Perhaps the Minister could follow up on that, especially on the broader point, given her role on legislation.

As for the point about the plan going forward, it would be good to know whether there is a published source of what is still to come and what amount of time that will take. People will be very glad to know that we are nearly at the end of this process of bringing in our own regime on financial services, so that our excellent sector can feel that the roundabout has stopped and that it can get on with serving Britain. London is still such an important centre for financial services, and I am very keen to support the Government in supporting that.

[Baroness Jones of Whitchurch (Lab)]

I thank the noble Baroness for that question. I can confirm that it is standard practice for the Treasury to produce de minimis impact assessments—I have got a nod from the team behind me, so I say that with some confidence.

The noble Baroness asked about the next steps for repealing assimilated law. The Government are committed to securing the benefits that the repeal and replacement of assimilated law can bring, creating a more agile and responsive regulatory regime. That means progressing work on files such as the European market infrastructure regulation and alternative investment fund managers directive. To be more specific, we will write to the noble Baroness to clarify any further information that we have on this. With that, I hope that noble Lords will approve the regulations.