Employment Rights Bill

Lord Sharpe of Epsom Excerpts

Committee stage
Tuesday 24th June 2025 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, Amendment 323E, tabled by the noble Lord, Lord Berkeley, is a curious but important proposal, addressing a very real challenge in the evolving world of work. The noble Lord, Lord Russell, pointed this out, as has the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Hendy.

The amendment seeks to clarify that substitution clauses in app-based platform work, such as food delivery, courier services and private hire transport, are valid only where the right to substitute is genuine, viable and actually used in practice. As many of us will know, much of our employment legislation was developed in an era when the labour market looked very different. The rise of app-based platforms and the gig economy has created new forms of work that do not always fit into the traditional categories of employment or self-employment, as has been said by previous speakers.

This amendment seeks to clarify one such grey area: the use of substitution clauses in platform work. It rightly asks whether these clauses are, in practice, genuine and workable, or whether they are being used to deny individuals the worker status that they would otherwise be entitled to. The noble Lords, Lord Russell and Lord Hendy, and others have explained in detail how that works in practice.

The broader point is that the Government must ensure that our workers’ rights framework is not stuck in the past. It must be up-to-date and dynamic enough to reflect the modern patterns of work and provide reasonable security for those engaged in them.

Too often, the flexibility of gig work is celebrated without enough attention being paid to the insecurity that can come with it: uncertain hours, low pay—which has been mentioned, including lower pay than the normal driver—and limited recourse to rights. Ensuring that the legal definitions we rely on are not open to exploitation is a vital step in protecting workers and maintaining fairness in the labour market. As other noble Lords said, this amendment may not be the final word on the matter, but it makes an important contribution to a conversation—the noble Baroness, Lady Neville-Rolfe, used the word “discussion”.

I give my compliments to the noble Lords, Lord Hendy and Lord Russell, and the noble Baroness, Lady Neville-Rolfe, and others for this conversation—or discussion. I hope that the Minister and the Government will see that there is a gap in employment legislation that needs to be looked at. We ought to deal with people, such as couriers and drivers, who are substituting to people paid even lower wages—and then scooting in front of you at the traffic lights, trying to push up the number of deliveries or collections they are making—in primary legislation, not in a statutory instrument somewhere down the line. I hope that the Government will look at this before we get to Report.

[Lord Sharpe of Epsom (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Palmer, with whom I agree pretty much entirely.

This has been a much more fascinating debate than I was anticipating, and that says a lot more about me than it does about the debate. I was particularly struck by the comments from the noble Lord, Lord Hendy; I had no idea that such practices had been accepted by the courts. That seems to be one of the cases, as we discussed in an earlier group, where the gig economy workplace is evolving rather faster than the law. That clearly needs to be looked at, otherwise we will end up with what seem to me, as a lay man, relatively perverse situations.

I have to say to the noble Lord, Lord Russell, that the thought of a peanut butter and pineapple pizza sends a rather nasty shiver down the spine. Do people really eat that? I would seriously hope not.

The gig economy and platform-based work are obviously integral parts of the modern labour market. We should not forget that the sector offers flexibility that many workers value, because it allows people to choose when, where, how much and how they work. For some, that flexibility is vital; it means they can balance their work with other commitments or supplement their income in ways that traditional employment models do not allow.

I completely agree with the noble Lord, Lord Berkeley, who introduced his amendment so eloquently, that there seems to be an incentive to come to this country. If we were able to control this, there would be an opportunity to help at least stem the flow of the boats, which is something that used to occupy a lot of my time.

On the amendment before us, which seeks to regulate the substitution clauses and redefine certain worker classifications, at this stage, we approach it with some caution, while acknowledging that it is clearly a subject to which we should all return and which demands further consideration. The intention to protect gig economy workers is commendable, but we should not make regulatory changes that unintentionally undermine the entire industry. With that in mind, I look forward to the Minister’s comments, but I do not believe that this subject will go away any time soon.

[Lord in Waiting/Government Whip (Lord Katz) (Lab)]

My Lords, I thank my noble friend Lord Berkeley for tabling Amendment 323E and everyone who contributed to this short but important debate on the issue of substitution clauses.

To be absolutely clear, the Government are very alert to the risks that my noble friends Lord Berkeley and Lord Hendy and the noble Lords, Lord Russell of Liverpool and Lord Palmer of Childs Hill, all raised on substitution. We recognise that substitution in the platform economy is an issue, and we share the concerns about the impact that it can have on working conditions and the prevalence of illegal working.

Some of the critiques that my noble friend Lord Berkeley made about e-bikes and e-scooters, and some of the comments made by the noble Baroness, Lady Neville-Rolfe, fall a little outside what we are talking about tonight. One only has to be in the Chamber at Oral Questions on a regular basis to understand that noble Lords across the whole House share concerns about the impact that e-bikes and e-scooters are having on general society, as well as their attitudes towards the noble pursuits of cycling, walking and sharing public spaces.

There is growing awareness of substitution clauses and their use to deny workers core protections, including the national minimum wage and holiday pay, as set out by many noble Lords this evening, particularly the noble Lord, Lord Russell of Liverpool. Clearly, in extremes this can lead to abusive and exploitative treatment of workers, and we are looking at it closely.

My noble friend Lord Berkeley raised the issue of illegal working as reported in today’s edition of the Sun. It is important in considering this issue to realise that the Government recently introduced an amendment to the Border Security, Asylum and Immigration Bill on Report in the other place to extend the scope of the requirement on employers to carry out right to work checks on limb (b) workers or individual subcontractors, such as those working in the platform economy.

We must remain in step with modern labour market models. The purpose of these changes is to require businesses that employ individuals in new labour markets to check that only those with a right to work in the UK are eligible to participate in these arrangements, and to enable Immigration Enforcement to issue penalties where they are not. This ensures that compliance is equivalent for traditional employers. That, as I understand it, is the core of the issue raised in the newspaper report described by my noble friend Lord Berkeley.

The links between substitution and employment status demonstrate how complex this area is. As my noble friend Lady Jones said earlier this evening in discussing Amendment 318, we are committed to consulting on a simpler employment status framework. My noble friend Lord Hendy said that we should look at this holistically. I am confident that this will provide an opportunity to hear views from a wide range of stakeholders on the use of substitution clauses and the interactions with employment status. This is an important issue, but I am also aware that there is a complex interplay with measures we are going to discuss shortly in Committee on the Border Security, Asylum and Immigration Bill. In that context, it might be useful for me to take this back to colleagues in the Home Office and see how best to pursue it further.

I therefore ask my noble friend Lord Berkeley to withdraw Amendment 323E. In so doing, as this will be my last opportunity to speak in Committee, I would like to take this opportunity to thank all noble Lords who have taken part in the wonderful 11 days in Committee on this Bill for their constructive engagement and, indeed, at times, stimulating debates—who would have thought we would get so many days in Committee? I take note of what the noble Lord, Lord Sharpe, said earlier about the pace of progress during immigration legislation. As I am going to be on the Front Bench for the Border Security, Asylum and Immigration Bill later this week, all I can say is: I simply cannot wait.

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Moved by

[Lord Sharpe of Epsom]

325: Clause 153, page 148, line 31, at end insert—
“(3A) The Secretary of State must have regard to the following objectives when making any regulations under this Act—(a) the international competitiveness of the economy of the United Kingdom, and(b) its growth in the medium to long term.”Member’s explanatory statement
This amendment would require the Secretary of State to have regard to the objective of the international competitiveness of the economy and its growth in the medium to long term when making any regulations under the Act.

[Lord Sharpe of Epsom (Con)]

My Lords, I will speak to my Amendments 325, 326A and 329B, and briefly allude to Amendments 330BA and 330E, tabled by my noble friend Lord Leigh of Hurley.

The Government have stated that this Bill represents the biggest upgrade to workers’ rights in a generation. Given the tremendous importance that the Government have placed on this piece of legislation, one would reasonably have expected them to have conducted a comprehensive and thorough impact assessment. Indeed, the noble Lord, Lord Leong, argued earlier that the Government had done just that. However, the fact remains that Regulatory Policy Committee has awarded the Government’s impact assessment a red rating, which encompasses several critical areas, including the Trade Union Act 2016 repeals, day-one rights provisions, flexible working arrangements, and measures addressing harassment by third parties. Such a rating indicates fundamental deficiencies in the Government’s analysis of this legislation’s potential consequences—a point that has been argued from this side of the Chamber on a number of occasions.

I will illustrate precisely how inadequate this impact assessment is by examining one particularly striking example. It states that:

“There could also be wider impacts on society, including … a reduction in days lost to strike action if Trade Union reforms lead to better industrial relations, which will prevent significant costs on the economy. Rail strikes alone are estimated to have cost the UK economy at least £1.7 billion over the eight-month period to January 2023”.


This statement exemplifies the superficial and speculative nature of the Government’s analysis. Rather than providing concrete evidence and detailed economic modelling, they have resorted to hypothetical scenarios and broad generalisations. They suggest that their reforms might lead to better industrial relations, which could potentially reduce strike action and in turn prevent economic costs. However, this chain of assumptions lacks any of the rigorous analysis which legislation of this magnitude demands.

Furthermore, although the Government cite the economic impact of rail strikes, they fail to provide a comprehensive analysis of how their specific proposals would address the underlying causes of industrial disputes. They offer no detailed examination of the potential unintended consequences of their reforms, nor do they adequately assess the costs that businesses and workers might face during the implementation of these new rights. The mention of implementation affords me an opportunity to again remind the noble Lord, Lord Leong, that we will very soon be delivered an implementation plan.

On Amendment 325, we have heard Ministers trumpet on a number of occasions PwC’s global CEO survey, which ranked the UK as the second most attractive destination for international investment. Unfortunately, that claim collapses under scrutiny. The survey was conducted before the current Chancellor’s first Budget and before the Government began systematically dismantling the pro-growth, pro-enterprise environment that we left in place. Since then, the UK’s position has collapsed to 29th in IMD’s world competitiveness rankings. We are now considered less competitive than Oman, Saudi Arabia and the Czech Republic. We are barely ahead of Kazakhstan and Kuwait. That is not a global powerhouse. What is the Government’s response? Instead of halting the slide, they are doubling down with a raft of measures that will make the UK even less attractive to investors, less hospitable to entrepreneurs and less viable for businesses that are looking to grow.

At the centre of this is the Employment Rights Bill. This legislation threatens to make Britain one of the most rigid and punitive labour markets in the developed world. Let us be clear: the Bill introduces day-one rights for employees to bring legal claims, dramatically increasing the litigation risk for employers from the moment a contract is signed. It expands rights around dismissal, probation and workplace disputes, turning even small staffing decisions into potential courtroom battles. It removes key flexibilities that employers rely on to respond to changing economic circumstances. This may all sound very appealing in the abstract. The Government will say that it is modernising employment rights, but in practice job creation will slow, entrepreneurial risk will drop and, crucially, offshoring will accelerate, because businesses can choose to hire in other jurisdictions —and they will.

We are already seeing warnings from business leaders that the cost of employing in Britain is simply becoming too high, not just financially but legally and procedurally. A recent survey by Saffery and Ward found that employers are planning layoffs and the relocation of operations abroad in direct response to increasing national insurance contributions and regulatory burdens, and now the spectre of hostile employment legislation. EY has warned that high energy costs and slow growth are deterring investment, while major employers are now reviewing UK operations due to the cumulative cost of doing business here.

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[Baroness Jones of Whitchurch (Lab)]

We on these Benches meet with members of the SME sector all the time for various purposes. As well as the formal meetings, we meet them in all sorts of guises—for example, to discuss the industrial strategy and some of the digital growth policies. I do not think it practical to do what the noble Lord has asked, but I can assure him that the more formal consultation meetings happen regularly.

[Lord Sharpe of Epsom (Con)]

I thank the Minister for her response. It is clear that there is significant disagreement on this subject. Indeed, there is a degree of disagreement on the statistics. We seem to be quoting statistics that contradict each other. I have to say that I think ours are rather more up to date—but I would say that.

I thank the noble Lord, Lord Vaux of Harrowden. I completely agree with everything he said, as I do with everything said by my noble friends Lord Leigh of Hurley and Lady Neville-Rolfe. It is very concerning that, in the other House, the Government tabled further amendments with no meaningful assessment of their economic or practical impact, and no proper consultation with the stakeholders that this will affect. This is not how good legislation is made. It is not the standard Parliament or the country should accept.

The Minister just described the Bill as the biggest upgrade to workers’ rights in a generation. If that is the case, one might reasonably expect a thorough and credible impact assessment, not one that is rated red by the Regulatory Policy Committee. That is not a minor procedural footnote; it is a warning and a signal that the economic, legal and operational consequences of this legislation have not been properly understood.