Employment Rights Bill

Lord Vaux of Harrowden Excerpts

Committee stage
Tuesday 24th June 2025 Lords Chamber

I conclude by saying that, if the Government are confident in the righteousness of their reforms, let them subject them to proper scrutiny. If they wish to maintain credibility when they speak of reducing red tape, let them apply that logic consistently and not selectively. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I will speak to Amendment 326A on behalf of the noble Baroness, Lady Penn, who apologises that she is unable to be here.

The amendment is simple: it would require the Secretary of State or the relevant devolved counterpart to have regard to the impact of any regulations made under the Bill on the economic growth and competitiveness of the United Kingdom. It is very similar to Amendment 325, just introduced by the noble Lord, Lord Sharpe of Epsom, which itself mirrors the wording of the secondary objective for financial regulators, which was introduced in the Financial Services and Markets Act 2023. I would support either one; they ultimately have the same goal.

As we heard on many occasions in Committee—we are reaching the end, at long last—this is a skeleton Bill, where an enormous amount of the detail will be added later by regulation. I counted 173 regulation-making powers in the Bill—a quite staggering number. Call me old-fashioned, but I rather think that we should do the work first and then legislate, not the other way around.

We also have an impact assessment that accompanies the Bill that, as we were just told, was described by the Regulatory Policy Committee as not fit for purpose. In many cases the impact assessment makes no effort at all to quantify the costs or benefits, precisely because it is not yet known what will be in the final regulations that follow the Bill. The Government themselves concede in the impact assessment that many of the measures in the Bill will have negative consequences. For example, the Government expect that, overall, the measures in the Bill will impose costs to business of around £5 billion. They also state very clearly that these costs will fall disproportionately on small businesses. The potential negative impact on growth and competitiveness from that is obvious.

Some of the negative aspects could be minimised if the regulations are well designed. To give just one example, I have been concentrating my efforts on the Bill on the introduction of day-one unfair dismissal rights. The impact assessment is very clear on the potential negative impacts from that on businesses and, in particular, on the potential hiring of employees who are seen as higher risk, such as younger people. That is my top concern in that respect.

After describing the potential negative consequences, the impact assessment rightly says:

“The impact of hiring and labour mobility will ultimately depend on the final regulations on what is permissible in the ‘initial statutory period’ of employment”.


I agree; a well-designed probationary period could negate many of the impacts that the Bill could cause, which is something that I hope the Minister will be prepared to discuss before Report. However, at the moment, we have no idea what the final regulations will be and neither, it appears, do the Government. They still have not carried out the relevant consultation.

That is a really good example of the importance of this amendment. The final consequences of the Bill will depend on the detail that is to be added later or amended by regulation. We should not just take that on trust. Although I of course have the greatest faith in the Minister, this Government cannot speak for or bind future Governments.

The Government have consistently stressed the importance of growth and competition, although it is fair to say that their actions have not always followed their rhetoric. To quote the Chancellor in January this year:

“Economic growth is the number one mission of this government … most of all … without economic growth … we cannot improve the lives of ordinary working people”.


Surely that last point is the main point of the Bill: to improve the lives of ordinary working people. It must be essential, and I assume agreed, that where the measures in the Bill could have negative impacts on growth, those negative impacts should be identified and taken into account when adding the details to the Bill by regulation.

In the same speech, the Chancellor went on to say:

“The strategy that I have consistently set out … is to grow the supply-side of our economy … recognising that first and foremost … it is businesses, investors and entrepreneurs who drive economic growth … a government that systematically removes the barriers that they face—one by one and has their back”.


It is hard to disagree with that, so surely we should ensure that the Bill does not do the opposite and create barriers for business.

There is a good precedent for including a growth and competitiveness objective in a Bill such as this. The Financial Services and Markets Act 2023 introduced a secondary objective for financial service regulators to facilitate international competitiveness and growth, something that the current Chancellor has been vocal in her support of and has rightly put pressure on regulators to follow, including through the issuing of new growth-focused remit letters to the regulators.

Having such an objective, or in the case of these amendments just to have regard to, is not new and is entirely consistent with stated government policy. Given the potential negative impacts the Bill may have—by the Government’s own admission—the sheer volume of detailed regulation that must follow and the difference that could be made to the consequences of the Bill if those regulations are well designed or badly designed, we must surely have some clear objectives for those regulations. All that these amendments would do is ensure that growth and competitiveness must be taken into consideration. Surely that is not too much for us to ask.

[Baroness Neville-Rolfe (Con)]

My Lord, I have added my name to Amendment 326A in the name of the noble Baroness, Lady Penn. I agree with all that has been said by the noble Lord, Lord Vaux of Harrowden, in introducing it, and, indeed, with the convincing analysis by my noble friend Lord Sharpe.

Noble Lords may recall that I come to the scrutiny of the Bill constructively, having worked for Tesco for many years and enjoyed excellent relations with the USDAW union, the noble Lord, Lord Hannett of Everton, and with the trade unions in general, under the noble Lord, Lord Monks, at that time. We always tried to treat people well, and the success of the business was a testimony to that. We complied with the law.

However, the law is now changing, and I am afraid that this Committee has shown that the Bill needs further work. As drafted, it will be a huge check on growth and will undermine the competitiveness of which we have rightly been very proud in the UK. My noble friend Lord Hunt of Wirral mentioned earlier the worrying research by the Institute of Directors that reveals that seven in 10 business leaders surveyed believe that the Employment Rights Bill will have a negative impact on UK economic growth.

I have two particular examples, which I hope the Minister will look at again. First, Ministers—or rather their civil servant agents, and possibly even the trade unions—will be able to take a legal case where an employee is unwilling to pursue a complaint. That is inappropriate and unfair; consent is such an important principle. It also risks putting further pressure on the already struggling tribunal system.

Secondly, and I apologise that this example has already been mentioned, the Bill will radically reduce the effectiveness of the labour market by giving employees the right to claim unfair dismissal from day one of their employment. Other employees will be disadvantaged, as those who are slack, do a poor job or play the system will not be able to be dislodged without a long tribunal case. This will hit good employees who need to cover for their fellows.

The Minister has very helpfully agreed that there should be a probation period during which suitable arrangements can be made in such circumstances, but we have no detail. All of that will go into regulations, which we will not be able to reverse. That is why I feel so strongly about this evening’s amendment on growth and competitiveness. This would apply when regulations were being made by Ministers. There is, unfortunately, a plethora—a cornucopia—of powers in the Bill. It is essential that Ministers, here and in the devolved Administrations, to which our amendment refers, should be required to look at the impact on UK economic growth and competitiveness when they are making regulations. Otherwise, I fear that the growth objective of this Government is for the birds.