ET fees: the BIS minister that time forgot

On Saturday, in a stunning example of the laughably low journalistic standards at the Daily Mail and the inability of some political dinosaurs to adapt to changes in the known environment, the paper re-ran it’s infamous story of the ‘£1.6 billion a year gravy train for employment lawyers’ derailed by ET fees.

In a bold attempt on the world record for the number of factual errors in the opening paragraph of a newspaper article, and appropriately illustrated with a stock photo of a gavel – never used in British courts, let alone employment tribunals – the paper’s political editor, James Chapman, writes:

“The £1.6 billion a year industrial tribunal gravy train has been brought to a shuddering halt. Official figures reveal there has been a fall of almost 80 per cent in the number of cases brought against firms by employees. Business leaders said the Government’s introduction of changes to deter vexatious claims appeared to have ended the damaging ‘no win, no fee’ culture that flourished under Labour.”

At no point in the article does Chapman bother to explain how he arrived at his figure of £1.6 billion a year, but he does throw around a few clues by telling us that, thanks to ET fees:

“The level of claims has returned to levels seen in the early 2000s, before the escalation of no win, no fee cases helped the number to spiral to almost 240,000 a year. Under the last government the taxpayer met the £86 million a year cost of running the tribunals. Firms were spending around £1.6 billion a year in defence costs. The British Chamber of Commerce estimated the average cost to a business of defending itself at tribunal is £8,500, and the average cost of agreeing a settlement is £5,400.”

However, we don’t need Chapman to tell us how he got his £1.6 billion figure, because we know this from the original version of his article, penned by Steve Doughty and which appeared in the Daily Mail as long ago as 29 July 2014. That article – headlined “Hallelujah! The gravy train’s derailed” – informed us that “there were 191,000 employment claims in the financial year to March 2013 … with the average defence costing £8,500.” Multiply £8,500 by 191,000 and you get … £1.6 billion.

Strangely, that July 2014 article made no mention of ‘no win, no fee’ lawyers – the target of Doughty’s wrath being “the multi-billion pound industry built on vexatious discrimination claims against employers.” But the evident source of that vexatious story (and another in the Sunday Express the same week), Conservative BIS minister Matthew Hancock, has this time put his head above the parapet to tell Chapman that:

“Labour’s compensation culture was totally out of hand. It cost millions and warned businesses off creating jobs because of the risk of being held to ransom by a spurious claim. We have worked hard to reform tribunals so they work better and more fairly … and genuine abuses can be dealt with properly and only reach court where absolutely necessary. Yet Ed Miliband has not learned lessons and would reverse this progress.”

In fact, it is Matthew Hancock and James Chapman who have failed both to learn the lessons from the debacle of the Daily Mail’s July 2014 article, and to absorb the factual evidence that has emerged from the Ministry of Injustice over the past eight months.

Let’s leave aside the facts that employment tribunals haven’t been called industrial tribunals since 1998, and that employment tribunal cases are down by some 65 per cent, not “almost 80 per cent”, and focus on Chapman’s ignorant confusion of employment tribunal claims, and employment tribunal cases. For the BCC’s average cost figures of £8,500 for a business to defend itself at a tribunal hearing, and £5,400 to agree a settlement, are per employment tribunal case, not employment tribunal claim. And there have never been 191,000 – let alone 240,000 – employment tribunal cases a year; those figures are for the total number of claims, including both single claimants and all the claimants in the relatively small number of multiple claimant cases. If the concern is the impact of ET claims on business, then it is the total number of cases (single claims/cases + multiple claimant cases) that is most meaningful, since that is also the number of employers affected.

In 2012-13, the headline total of 191,541 claims used by Doughty to calculate his £1.6 billion figure consisted of 54,704 single claims/cases brought against 54,704 employers (or slightly fewer than that, in fact, as some claims would have been against the same employer), and a total of 136,837 multiple claimants in just 6,104 multiple claimant cases brought against 6,104 employers. So Doughty would have been a little more accurate if he had multiplied the BCC’s figure of £8,500 by 60,808, not 191,541.

Furthermore, the £8,500 figure is wrong, firstly because it’s a considerable over-estimate (the government’s own figure is £6,200), and secondly because only about one in five cases go to a tribunal hearing. Most cases are settled or otherwise resolved before they reach a hearing, so the BCC’s lower figure of £5,400 applies (though, again, the government’s own figure for settlements is £3,500). Indeed, the government’s figure for the average cost to employers across all tribunal outcomes is just £3,900.

So, all in all, Doughty’s bogus figure of £1.6 billion – mindlessly regurgitated eight months later by Chapman – is more like £366 million (£0.37 billion), if you accept the BCC’s dodgy average cost figures, and just £237 million (£0.24 billion) if you prefer the government’s more reliable average cost figure of £3,900. And, finally, only about two-thirds of that total cost to employers is borne by businesses, as one in three employment tribunal cases (including the vast majority of those pesky multiple claimant cases) are brought against employers in the public and voluntary sectors. In short, Doughty and Chapman overstate the ‘problem’ for their beloved private sector firms by a factor of 10.

As for the dinosaur Hancock, his entire argument rests on the assumption that only weak or vexatious claims/cases have been deterred by the hefty, upfront fees. But if that were true, and only strong claims/cases were making it to the tribunals, the proportion of successful claims would have risen towards 100 per cent, and the proportion of unsuccessful claims would have dropped towards zero. And what we – but seemingly not the Minister – have learned since he first fed the ‘£1.6 billion gravy train’ story to the Daily Mail and Sunday Express in July 2014, is that the very opposite is happening.

As the following chart (based on official figures) shows, the proportion of successful claims (the blue line) has gone sharply down, not up, and at just eight per cent in the most recent quarter for which the figures are available (July to September 2014) was less than half that in each of the six years before the introduction of fees. And the proportion of unsuccessful claims is markedly up, not down.

outcomes

Now, it might be said that the proportions shown in the above chart are not the full story, as four in five claims do not go to a hearing, and are either conciliated (i.e. settled) by Acas, or are withdrawn by the claimant. And, as Naomi Cunningham and Michael Reed have noted recently, “most of these withdrawals, but not all, represent some form of non-Acas settlement.” So, it might be said that the proportion that matters is the grand total of those claims that are successful at a hearing or result in a default judgment, plus those that are conciliated by Acas, and those that are withdrawn.

However, as the following chart shows, that proportion has also gone down, not up.

outcomesALL

So, another Hancockusaurus and Daily Mail #Fail. Though you do have to admire their persistence.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s