Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

[Lord Moynihan of Chelsea (Con)]

My Lords, I support this important amendment and endorse the serious concerns just now expressed by the noble Lord, Lord Fox, and my noble friend Lord Hunt of Wirral. I declare my interests as a businessman, an entrepreneur and an investor.

The noble Baroness, Lady O’Grady of Upper Holloway, questioned the need for a stated purpose for the Bill. I am not sure what the logic is there: the most likely reason for a Bill having no purpose is a lack of clarity by its sponsors as to what they are trying to achieve. The noble Baroness, Lady Carberry of Muswell Hill, complains that the list stated in the amendment is non-exhaustive, which I agree with, and then somehow jumps to the conclusion that no list at all would be preferable. Again, I am afraid the logic of that escapes me.

I am far less experienced than my noble friend Lady Neville-Rolfe, but I feel that there is always an obvious advantage in having a purpose clause. In the case of this Bill, I am sure the Government must agree that those who will face the task of interpreting the meaning of the Bill in the future should be given as much clarity as possible, through a purpose clause, as to why the Bill was passed and what its purpose was. Courts in the future will far prefer to have a lucid statement of what the new law sets out to accomplish, rather than being given too wide latitude and freedom to interpret the Bill in this way or that. So I commend the overall objective of the noble Lord, Lord Fox, and hope that the amendment, or similar, will form part of the eventual Bill.

This very lengthy Bill will, if passed without a purposes section, be more open to abuses of the extensive powers it contains. This amendment would put a few appropriate, albeit modest, restraints on the ability of a Government to go too far in applying these powers. To be clear, this proposed purpose clause from the noble Lord, Lord Fox, is just a start and, for me, not completely satisfactory by any means. The list is indeed not exhaustive. In addition, the additional amendments would burden companies with yet another compliance code of conduct, which will serve to send sensible non-executives screaming from the room and possibly off to Dubai. We have to let boards focus on managing their businesses, serving their customers and making sure it is a well-run business, not having to implement new compliance code after new compliance code that will only ever be observed with lip service.

On this point of a non-exhaustive list, I wish to add to the list of purposes of the Bill, in addition to the wording that my noble friend Lady Neville-Rolfe suggested, an additional purpose of supporting, improving and not reducing flexibility in employment relationships. We will move on to the issue of flexibility in the next group of amendments, so I will not expand on that point here, but I recommend the addition of that purpose, as well as the wording proposed by my noble friend Lady Neville-Rolfe, to the list in Amendment 1.

[Baroness Noakes (Con)]

My Lords, I have never been much enamoured with purpose clauses, although they are a convenient way of having an early debate on the principles of a Bill before we get stuck into the detail. Indeed, we can see that the opportunity and attraction of another Second Reading debate is irresistible to noble Lords. Part of the reason is probably that when we have Second Readings nowadays, at most about four minutes are allowed, but when we get into Committee we have 10 minutes, which is a wonderful way of proceeding.

The noble Lord, Lord Fox, has tried to encompass the Government’s aims for the Bill in his wording of Amendment 1, but in doing so he has not covered the whole content of the Bill. I agree with the noble Baroness, Lady Carberry, on that, although we probably will not agree on much else during the passage of the Bill. For example, Clause 75 repeals the Strikes (Minimum Service Levels) Act 2023, which we knew the party opposite hated when we enacted it. That Act empowered employers to set minimum service levels in a few defined public services so that service users, such as NHS patients and commuters, did not have to suffer the massive disruption that we have seen inflicted by the unions that are active in the public sector. Repeal of the 2023 Act takes away the power to protect public service users, and does nothing that fits within the purposes put forward by the noble Lord, Lord Fox, in his Amendment 1. Does that mean that Clause 75 should not be in the Bill? If not, what is the purpose of a purpose clause? Perhaps the noble Lord can answer that.

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Moved by

[Baroness Noakes]

5: Clause 1, page 2, line 9, after “employer” insert “, other than a small and micro business,”
Member’s explanatory statement
This amendment, along with another in the name of Baroness Noakes, takes small and micro businesses (and similarly sized undertakings) out of the ambit of Part 1 of the Bill.

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[Baroness Noakes (Con)]

My Lords, I rise to move Amendment 5 and will speak also to Amendment 124 in this group. I thank the noble Lords, Lord Londesborough and Lord Vaux of Harrowden for adding their names to the amendments. The noble Lord, Lord Vaux of Harrowden, was hoping that we would be progressing rather more rapidly during Committee. Unfortunately, he has now had to leave us, but he has assured me that he remains fully committed to the principles behind these amendments.

Amendment 5 seeks to amend new Section 27BA of the Employment Rights Act 1996 as inserted by Clause 1 of this Bill so that the new right to be offered guaranteed hours will not apply to small and micro businesses. Small and micro businesses should not be dragged into any of the changes made in this part of the Bill, which is why I tabled the more extensive exclusion in Amendment 124. The Public Bill Office would not let me table that amendment at the beginning of Part 1, which is what I wanted to do, but it suggested Amendment 5 as a mechanism to enable us to have an early debate on the impact of the Bill on small and micro businesses. It is such an important issue that it has already arisen in the speeches of several noble Lords on the other two groups that we have debated, so now is a good time to have an initial debate on small businesses.

My blanket Part 1 exclusion—in Amendment 124 —applies to small and micro businesses. I have used the definitions in the Small Business, Enterprise and Employment Act 2015, so that a “small business” is one with fewer than 50 staff and a “micro business” has fewer than 10 staff. The 2015 Act also encompasses other types of undertaking, so small charities et cetera would come under that definition.

I have some considerable sympathy for Amendment 282 in the names of my noble friends Lord Sharpe of Epsom and Lord Hunt of Wirral, which is also in this group. It is similar to mine, but it instead also covers medium-sized companies, which are those with between 50 and 250 employees. I believe that the greatest harms done by this Bill will be to those at the smaller end of the scale, because they have the fewest management resources to cope with the kinds of burdens that the Bill will inflict on large swathes of our business community. I am not opposed to my noble friends’ amendment, but if we could see where the biggest harm would be, it would be at the very smallest end.

According to the latest Department for Business and Trade statistics, there were 5.5 million businesses in total, employing nearly 28 million employees. The micro-business segment—those with up to 10 employees —accounts for 95% of the total number of businesses, 5.2 million. However, 4 million of them do not have any employees. The rest—1.2 million businesses—have over 4 million employees between them. So we are talking about businesses with an average size of three employees; these are very small operations.

The 220,000 businesses that have between 10 and 50 employees have 4.3 million employees in total. The average for this category—small businesses—is around 20 employees, so it is still a very small operation. The rest, large and medium-sized businesses, account for only a bit over 1% of the business population—that is the number of businesses—but they employ 53% of the workforce.

If my amendment—to take Part 1 out of scope for small and micro businesses—is accepted, it would still apply to private sector businesses employing around 15 million employees, plus, of course, the 6 million employed in the public sector. It would not apply to around 1.4 million businesses with around 8.3 million employees.

The Government’s economic analysis cites a figure of 13 million employees who would be excluded for small and micro businesses, but that seems to include the 4 million businesses with no employees, which I have assumed are things such as sole traders, who are not actually employed. If the Minister responding to the amendment has any better analysis of the numbers, I would be grateful if he would write to me, because I find them a little confusing.

The Government’s assessment of small and micro businesses shows that five of the nine largest measures and two of the four medium-sized measures have a disproportionate impact on small and micro businesses. I am genuinely astonished that the Government would even contemplate bringing forward measures which are so disproportionately skewed in terms of harm to small and micro businesses. Those that have the biggest impact are found largely in Part 1 of the Bill.

Several noble Lords have already raised the problems that the Bill will create for those small businesses, and at Second Reading a number of noble Lords spoke to exactly the same issues. At the weekend, I went back to the closing speech of the Minister, the noble Baroness, Lady Jones of Whitchurch, at Second Reading. She did not even refer to the problems for this important sector of the economy; she talked about business more generally, but not about the small and micro businesses, or even the medium-sized businesses, that will be impacted.

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[Baroness Noakes (Con)]

My Lords, I think the Minister will find that the only amendment that can be withdrawn at the moment is Amendment 5. The others have not been reached on the Marshalled List.

I thank all noble Lords who have taken part: the noble Lords, Lord Londesborough and Lord de Clifford, on the Cross Benches, and all my noble friends who have spoken in this debate. Between them, they have communicated the very special issues that arise for smaller businesses right at the beginning of their life, when those early decisions are made about taking people on as they grow, and the risks and opportunities that come thereafter. I do not think that the Minister has begun really to internalise all the additional impositions that the Bill will place on that group of people.

I have a couple of small points. The Government’s economic analysis says that there are 13 million employees in small and micro businesses. I may not have been listening carefully to what the Minister said in response to my question on the numbers, but I did not hear him mention 13 million. I am hoping that I can get an analysis of where that 13 million comes from in due course. That is probably the most straightforward of the questions that arise.

The important thing here is that small and micro-businesses are very prevalent in our communities and involve really small numbers of people in their businesses, and it is a question of understanding what effect the additional imposition of the rights that are being conveyed in the Bill will have on their businesses. Small businesses, as the noble Lord said, know that they are about people and that their whole success or failure depends on the people they get and the people that they can develop to grow with their business. But they also need significant flexibilities because, when you are that small, you need to be able to cope with the situations that arise in relation to those small numbers.

I do not think any small businesses are trying to get out of treating their employees with respect and developing them as suits their particular business, but it appears that the Government feel that you can impose the measures such as those in the Bill across the whole of the business community and just rest on platitudes such as, “Oh, well, the direct costs on business are going to be outweighed by the productivity gain”. That productivity gain is not peer-reviewed research; there is no evidence that there is a causative link between giving extra employment rights and getting any productivity. That has not been examined in detail, so it is wrong to keep asserting that the Bill will result in that.

But, importantly, the issue is what is relevant to different categories of business. I and my noble friends, and my colleagues on the Cross Benches, have been trying to convey the particular issues that small businesses encounter and need to be protected from. I had rather hoped that the noble Lord, Lord Leong, with his background, would have understood that and would have understood the need for those small businesses to have some degree of understanding from the Government Benches and not be told, “Well, of course they have to have payroll and IT; they’ve just got to go and get all those things”. We are talking about the wealth-creating segment of our economy. Not everyone is going to be growing fast, but some of them are, and some of them are going to be growing a lot. If we harm those, we harm the economic potential of our country, and that is what we have been trying to argue.

I am sorry that the Government are not in listening mode today. I am hopeful that they might be prepared to listen further, especially if they genuinely engage with the representative bodies that represent the smaller end of the business scale, because I believe that the Bill needs to take some account of the special circumstances in which small and micro-businesses find themselves. But obviously, today I will withdraw Amendment 5.

Amendment 5 withdrawn.

Employment Rights Bill

Baroness Noakes Excerpts

2nd reading
Thursday 27th March 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, this is a very bad Bill for many reasons, and I will have to ration myself to just two areas.

First, the Bill is unequivocally bad for businesses and therefore bad for growth. It is not pro-growth to impose £5 billion-worth of costs on businesses. It would be pretty bad if this Bill existed in isolation, but it is not in isolation; it is part of a triple whammy which involves the jobs tax, which will add over £20 billion to private sector wage bills, and the national minimum wage increases, which will add many more billions.

The Government seem to have forgotten that they need private sector businesses to grow if they are to achieve their overall growth objective. The economic impact analysis which accompanied the Bill claims the possibility of a small positive impact on growth, but the probability is a big negative impact, as suggested by the OBR in its spring forecast yesterday. For that reason alone, the Government should have killed this Bill at birth. The country cannot afford it.

In response to the triple whammy, most businesses are expecting to raise prices and reduce pay increases and employee headcount. That will lead to inflation, lower employment, reduced profits and reduced taxes. It will create an environment in which businesses will not invest, thus hobbling another leg of the growth ambition. A key plank of the UK’s ability to attract inward investment has been the flexibility of our labour markets. This Bill destroys that competitive advantage. It is an economic disaster zone.

SMEs are particularly hard hit by this Bill. The economic impact assessment is clear about this. Of course, anything which is bad for SMEs is also bad for growth, but policies which bear down excessively on SMEs are particularly destructive to the foundations of the way we do business in this country. At the last count, there were more than 5.2 million micro-businesses with fewer than 10 employees and a further 220,000 small businesses with 10 to 49 employees. Between them, they have nearly 13 million employees. Why would the Government want to put this huge group of employees at risk? I will be looking at amendments to this Bill to protect SMEs from its excessive burdens, and I look forward to working with the noble Lord, Lord Londesborough, on that.

My second area of concern is that the Bill is bad for some significant employee groups. For example, people with a history of health-related absence and young people with no track record will be less attractive as employees because of day-one rights and higher sick pay. There are many people who value zero-hours contracts, but they may be deprived of that opportunity because employers will be trying to avoid the risks of getting involved in conferring rights to guaranteed hours. This Bill will make life worse for many who want to work.

There are many aspects of the Bill which will need to be explored in detail. Your Lordships’ House has a responsibility to ensure that the Bill, as a minimum, does no harm. That will be a difficult task because it has deep flaws, but we must try.

Code of Practice on Reasonable Steps to be taken by a Trade Union (Minimum Service Levels)

Baroness Noakes Excerpts

Wednesday 6th December 2023 Lords Chamber

If the noble Lord, Lord Collins, decides to move his regret amendment, we will take the TUC’s advice and support His Majesty’s loyal Opposition.

[Baroness Noakes (Con)]

My Lords, I completely understand that the Benches opposite did not much like this legislation when it went through your Lordships’ House, as we have heard today, but it is the law of the land and has been passed by both Houses of Parliament. It seems churlish to hold out against a document that is only trying to help unions comply with its provisions.

The noble Baroness, Lady Bennett of Manor Castle, and the noble Lord, Lord Collins of Highbury, have listed a number of reasons for the code of practice to be rejected or regretted, as the case may be. I suggest that these reasons do not stack up. I refer to the reasons as specified in their amendments, as opposed to the broader political speeches that we have heard.

The amendment from the noble Lord, Lord Collins, says that the code of practice

“imposes significant new duties on trade unions”.

It does not. Paragraph 7 says:

“This Code imposes no legal obligations”.


It is just guidance. It therefore does not go beyond the scope of the 2023 Act, as the noble Lord’s amendment alleges. Put simply, his amendment is inaccurate. It acknowledges that the intention of the guidance is to “provide … clarification to unions”, but then complains that there are “significant areas of uncertainty”. Guidance, by its nature, will never be exhaustive. He seems to be calling for absolutely certain rules and not guidance, but this is guidance. Much will depend at the end of the day on the circumstances, and the courts—not the Government—will determine whether a union has taken appropriate legal steps to stay within the law.

The noble Baroness, Lady Bennett, did not go through her list of complaints when she spoke to her amendment, but I believe it is similarly misplaced. Her amendment says that the guidance can lead to fines on trade unions or make them into “enforcement agents”. She also complains that the draft guidance reduces workers’ rights. The guidance simply cannot do these things—it is just guidance.

The complaints of the noble Baroness might be more accurately targeted at the minimum service levels legislation itself, as we discussed earlier. That is now the law of the land. It is not the time to redebate those issues, which took up so much of your Lordships’ time in the last Session.

Lastly, the noble Baroness’s amendment says that the guidance somehow “breaches international labour commitments”, which, again, as guidance, it cannot do. Our obligations under the ILO conventions do not prohibit us from setting minimum service levels and certainly do not prohibit us from issuing guidance. I hope—though without much hope at all—that neither of the noble Lords will be pressing their amendments, as they really do not make sense.

[Lord Cromwell (CB)]

My Lords, good grief, how did it come to this? I come at this at a slightly different angle as a businessperson, and I know that the Minister has much business experience. However, in business, a great deal of time and study goes into how to motivate people to work productively. I find it difficult—and I wonder if I could ask the Minister whether he shares my view—that passing a law that in effect forces people to work is hardly the way to go about things, and is, in fact, a sign of failure. It is certainly a sign of regret.

Economic Crime and Corporate Transparency Bill

Baroness Noakes Excerpts

Consideration of Commons amendments
Monday 11th September 2023 Lords Chamber

[Lord Agnew of Oulton (Con)]

My Lords, I rise briefly in support of my noble friend Lord Faulks on this amendment. I am particularly grateful to him; I was involved in the earlier amendments, but I realised that it needed a premier division lawyer rather than a second division entrepreneur to get this through.

In our discussion with Ministers, we were often told that the enforcement agencies did not want this; that seemed disingenuous to me. I now have some information. For example, law enforcement agents have shown a strong appetite for cost protection and civil recovery. The chief capability officer of the Serious Fraud Office told the economic crime Bill committee that the SFO would like to see this, while the head of the National Economic Crime Centre told the same committee that they found cost protection “an attractive proposal”. I do not think that is a searing insight. Spotlight on Corruption has identified 60 high-risk cases, with the potential of £1 billion of frozen assets, and the chilling effect is palpable among them.

I respectfully disagree with the Government on this. I am grateful to my noble friends the Ministers who have spoken several times to all of us, but I think they are on the wrong side of logic.

[Baroness Noakes (Con)]

My Lords, I have some very real concerns about the impacts of the new failure to prevent offence on small and medium-sized entities. If my noble and learned friend Lord Garnier’s Motion E1 is agreed to, I think it could be very significant. I believe that the other place was wise to restrict the offence to larger companies only. Setting the threshold at the micro-entity level would still leave very many small and medium-sized entities within the scope of the offence.

I did try to find out how many companies would be affected. My noble friend the Minister said 450,000 companies would be brought within the net of the offence. According to Companies House statistics, around 3.1 million active companies filed accounts last year. Of those, 1.6 million were for micro-entities, and would therefore be excluded, but 1.4 million were for small companies that took advantage of the audit exemption. That, very broadly, is the group of companies that would benefit from the changes made by the other place; it is obviously rather more than 450,000. Whatever the number, there will certainly be regulatory costs for those companies, whether 450,000 or 1.4 million. My noble friend the Minister has given his estimate of what those costs will be. I have never placed much faith in estimates made by Governments of the direct costs of regulatory burdens that Governments try to impose. I generally put a multiplier against them to arrive at a more realistic figure.

However, I believe the most important cost is the opportunity cost that is imposed by regulation. Every time a new regulation is imposed, the people who run small businesses have to spend time away from thinking about their core activities, which should be wealth-generating. Every moment spent thinking about whether they have reasonable prevention procedures in place, or implementing those procedures, is a moment spent not thinking about how to grow the business or how to make it more profitable. Large companies have specialists to cope with all this. Small businesses often have no one beyond the proprietor of the business itself, but they are the very people who are supposed to be spending their time growing their businesses, thereby helping the UK economy to grow—and my goodness me, do not we need growth in our economy?

The cumulative effect of incremental regulation on individual businesses is huge, as any small businessman will tell you, but the cumulative opportunity cost for those businesses of missing out on that growth, and the impact that will have on UK plc, simply cannot be ignored when we are looking at any form of legislation that imposes burdens on businesses. I urge noble Lords to accept the pragmatic solution that the other place has put forward.

[Lord Hope of Craighead (CB)]

My Lords, I am greatly assisted by the correction made by the noble Lord, Lord Faulks; I had great difficulty in understanding the amendment on first reading. Now that he has corrected it, I would like to say from the point of view of a Scots lawyer that there is nothing startling in the proposition that is made. We in Scotland are quite used to the normal routine that law enforcement agencies are not liable in costs for the proceedings that have been taken, probably for the reasons that the noble Lord has clearly expressed.