The holes at the heart of Ed Miliband’s #ukemplaw speech

Yesterday, Labour leader Ed Miliband responded to recent media and internal criticism of his leadership by giving his #ukemplaw speech. This didn’t go quite so far as resolving the question of whether voluntary overtime should be included in holiday pay, but it did include a robust denunciation of inequality and the casualisation of so much of the UK’s labour force. There were repeated mentions of zero-hours contracts, low pay, and insecure work, and more than one shout-out for the Living Wage.

All fine and dandy, even if there wasn’t any new policy as such, and had the event concluded at the end of Miliband’s speech I would most likely have left Senate House feeling somewhat encouraged. But the speech was followed by a Q&A, and my positive mindset was inadvertently shattered when a Labour activist in the audience – picking up on her leader’s condemnation of zero-hours contracts and citing her own bitter experience – gamely urged Miliband to legislate for an outright ban.

Starting his response with a swipe at the Coalition’s plan to simply ban exclusivity clauses, which he (rightly) noted will do nothing to tackle the exploitative use of zero-hours contracts, Miliband went on to re-iterate Labour’s own plan to pass legislation giving zero-hours workers who are in fact working “regular hours” a legal right to demand a regular contract. “It is essential we do this”, said Miliband, “as the problem is affecting so many people.”

And then Miliband was off to the next question, without explaining how or why the “bad businesses” that cause so much misery to “so many people” will change their exploitative practices just because politicians in Westminster have passed yet more new employment law. Will tens of thousands of vulnerable, zero-hours workers suddenly discover the courage (and resources) to risk almost certain dismissal (or just a reduction in their hours to, well, zero) by issuing a tribunal claim against their exploitative employer for refusing to give them a regular contract?

No, they won’t. Which is why, if Miliband and his party are serious about tackling the ever greater casualisation of the labour market, and the associated zero-hours contracts, chronic low pay and insecure work, they have to start thinking about doing more than simply pass more laws creating more rights. For, as the October 2014 report of Labour’s own National Policy Forum acknowledges, “Employment rights have to be enforceable to mean anything.”

And what plans does Labour have to make employment rights – existing and new – more enforceable?

Well, somewhat belatedly, the party has started making the right sort of noises on tribunal fees, which have slashed the number of cases by 65% and left the average private sector employer facing a claim just once every 83 years. However, it’s pledge to replace the fees regime with one in which “affordability will not be a barrier to workplace justice” remains more a clumsy slogan than a credible policy solution to the not insignificant problem that outright abolition now comes with a price tag of some £40m in lost fee income (£4m) and increased operational costs (£35m).

However, as already noted, understandable fear of victimisation or summary dismissal means that, high fees, low fees or no fees, many abused workers will not even contemplate taking their employer on with a tribunal claim. And that means rogue employers can profit from exploitation with near impunity. It was for this reason that, in 1999, the then Labour government established the mechanism by which the national minimum wage is enforced, both in response to complaints and pro-actively, by a team of HMR inspectors. And similar reasoning lay behind the creation of the Gangmasters Licensing Authority (GLA) in 2005.

The National Policy Forum report includes a pledge to extend the narrow remit of the GLA to other sectors such as “construction, hospitality and social care” – but the CBI, REC and other employer bodies will never swallow such an extension of licensing (and see below). And the report states that “alongside increased fines and a new role for local authorities in enforcement [of the minimum wage], HMRC’s remit on enforcement should be expanded to include related non-payment of holiday pay” – these being recommendations from the May 2014 report for the Party on low pay and the future of the minimum wage by businessman Alan Buckle. But the fines have already been substantially increased, and it is hard to see many cash-strapped (and in many cases near bankrupt) local authorities taking an active role in such (limited scope) enforcement.

So, if Miliband’s #ukemplaw speech is to mean anything, he and shadow ministers need to take a leaf out of Vince Cable’s book. Last month, at his party’s conference in Glasgow, Cable quietly announced that the Liberal Democrat manifesto for May 2015 will promise a new Workers’ Rights Agency that would “revamp efforts to enforce employment law and tackle the exploitation of workers” by combining the remits and work of “the minimum wage enforcement section of HMRC, the working time directive section at the Health & Safety Executive, the BIS Employment Agency Standards Inspectorate, and the GLA.” According to Cable, this “joined-up enforcement approach” would “ensure the minority of unscrupulous employers who break the law do not get away with undercutting other employers who play by the rules.”

And, if it makes Miliband and colleagues feel better about lifting ideas from Cable, this wasn’t actually Cable’s idea – he simply lifted it from me. Over more than a decade at Citizens Advice, I repeatedly advocated a consolidation of the State enforcement bodies into a Fair Employment Agency, so as to shine a light into the murkiest corners of the labour market, provide better value to taxpayers, and secure a fairer competitive environment for business. And I’ve continued to do so in recent years. I really am that boring.

However, not long after I got home from Senate House, a tweet by shadow work & pensions secretary Rachel Reeves alerted me to another, equally depressing hole in Miliband’s purported determination to tackle the scourge of insecure and badly paid work. Reeves was tweeting a link to an interview she and shadow business secretary Chuka Umunna have given to the Financial Times, from which it is clear that, faced with protests from the CBI and others, Reeves and Umunna are now rowing back on Miliband’s eve of conference pledge to raise the minimum wage rate to at least £8.00 per hour from October 2019. And, later in the evening, on BBC Newsnight, Umunna confirmed that Labour would only “try to get the minimum wage to £8.00 per hour by 2020”.

So, while Miliband’s #ukemplaw speech has been rightly praised for its greatly improved oratory and highly commendable “focus on inequality and insecurity,” the content seems as sadly hole-ridden as ever.

So, just how radical is Labour’s ‘£8 by 2020’ minimum wage pledge?

At the weekend, on the eve of the Labour party conference in Manchester, Ed Miliband used an interview in the Observer to reveal that, if elected in May 2015, a Labour government will raise the National Minimum Wage (NMW) rate to £8.00 per hour “by 2020” – which most observers have interpreted to mean from 1 October 2019, when the last annual uprating under the next government will take place.

Reaction has been mixed. Conservative Central Office was quick to claim that the pledge amounts to a slower rate of increase than that between 1999 and 2007.  At a conference fringe meeting, the right-wing commentator Iain Dale suggested that “£8.00 by 2020 is hardly a radical policy”, and the Fabian Society’s Andrew Harrop tweeted that “we need to go further and faster than £8 per hour by 2020”. On the other hand, the move was welcomed by the TUC and the trade union UNISON.

On the question of the rate, I find myself agreeing strongly with Andrew Harrop and – quite possibly for the first and last time ever – Iain Dale. With the NMW at £6.50 per hour from next month, the pledge of £8.00 per hour by 2020 equates to a steady annual increase of 4.25 per cent. Which is not massively above this year’s increase of 3 per cent, or even (what I’m told is) the average annual increase since 2010 of 2.3 per cent.

As the following chart shows, if this year’s slightly more generous increase of 3 per cent were to be replicated in each of the next few years – that is, the sort of rate of increase that George Osborne has said he would be happy with – the NMW rate would be £7.54 from October 2019, just 46 pence per hour below what it would be under Labour’s new proposal. Indeed, at that rate of increase, the NMW rate would reach £8.00 per hour in October 2021, just two years later than Labour now proposes. And Labour’s proposal looks rather pathetic against the Green Party’s far more ambitious policy of an NMW rate of £10.00 per hour by 2020. (I don’t think anyone knows what the Liberal Democrats would like the NMW rate to be in 2020).

NMW2

So, while certainly nothing to be sniffed at, the ‘£8.00 per hour by 2020’ pledge is hardly radical. At least, not in terms of the NMW hourly rate.

However, Miliband’s announcement does represent a radical break away by Labour from the long-standing political consensus that the NMW rate is set not by politicians, but by the ‘independent’ Low Pay Commission. George Osborne crudely tossed this 15-year-old political pact aside in January, when he let it be known that he would be content with a rate of £7.00 per hour. But, presumably out of fear of upsetting the TUC and trade unions, Labour has stuck with it. Until now.

This more radical aspect of the move seems to have gone unnoticed by most commentators, with the notable exception of the CBI which, together with the TUC, has dominated the Low Pay Commission (and therefore the NMW rate) since 1999. “A move to a politicised US-style system is not in the interest of companies or workers”, said the CBI in its response. Well, that depends. But it’s probably fair to say that the move is not in the immediate best interests of the CBI, which would no longer have quite the say on the setting of the NMW rate that it does now.

Like Andrew Harrop, I’d like to see Labour go a lot further and faster than £8.00 per hour by 2020. More particularly, I’d like to see the NMW rate brought up to at least 60 per cent of median earnings by 2020 at the very latest, not some time afterwards (as the detail of Labour’s proposal suggests). And I’d like to see Statutory Maternity & Paternity Pay raised to parity with the NMW by 2020.

But at least now we are talking openly about what the NMW rate should be, rather than leaving it to be fixed by TUC and CBI officials behind closed doors. And, believe me, that is pretty radical. The TUC may have publicly welcomed Miliband’s announcement this week, but I suspect it did so through gritted teeth. Certainly, the CBI is by no means alone – as this blog post by the New Policy Institute illustrates.

So, over the coming months, Miliband and his team are likely to come under intense pressure – from both sides.

With many thanks to Ravi Subramanian of UNISON, whose tweet of his own graph prompted me to write this post.

Labour’s contract killing

Earlier this week, I was offered a contact. Which, sadly, doesn’t happen as often as my bank manager or my family would like. And, in any case, there wasn’t any money involved. At least, not for me.

On the plus side, the contract was offered to me by none other than the leader of the Labour Party, Ed Miliband. Yes! Me and Ed, bound together by a contract signed in brotherly blood. Well, me, Ed and a few thousand other people. Maybe tens of thousands. Quite a lot of brotherly and sisterly blood, then. Ed might need a transfusion.

As contracts go, it’s quite short – just ten brief clauses, each one a policy pledge by Ed. And, being a workplace rights nerd, I was pleasantly surprised to find that no fewer than three of the pledges relate to workplace rights. However, the wording of those three clauses left me with both a sinking feeling in my stomach, and a strong desire to bash my head against the nearest wall. Let’s take each of the workplace rights pledges in turn.

Ban exploitative zero-hours contracts

Well, I’ve already written elsewhere about Labour’s fumbling towards a credible position on the exploitative use of zero-hours contracts, so I’m not going to add much here. Suffice to say, Ed and his team are going to have to wake up to the fact that, whilst it’s very easy to make speeches criticising the exploitative use of zero-hours contracts, in practice (and in law) it is not so easy to distinguish between the exploitative and the fair use of such contracts. The very same paper zero-hours contract could be used entirely differently by two separate employers – one in a way that benefits both the employer and the employee, and one in a way that benefits only the employer and simply exploits (and quite possibly brings severe hardship to) the employee. That’s a conundrum that won’t be solved by sloganeering.

Make work pay by strengthening the Minimum Wage

Well, yes, but what does ‘strengthening’ the NMW actually mean? In the hope that someone in Labour might provide an answer, earlier this week I put the question out on Twitter. And Antonia Bance – a former Labour parliamentary candidate – promptly responded by suggesting that it means “raising & enforcing [the NMW]”.  Well, yes, but raise it by how much, and better enforce it how? To which Antonia’s response was: “I don’t think we ‘ll know the answers to questions of detail unless Labour get into government”, and “broad promises that show direction of travel & values are thought more effective than detailed pledges”.

So it would seem. But to my mind, the votes of the more than one million workers paid at or just above the NMW rate are much more likely to be captured by a specific promise of a new, higher rate than they are by a ‘broad promise showing direction of travel’. George Osborne is on record as saying he believes Britain can ‘afford’ a rate of £7.00 per hour, without any significant negative labour market consequences, and if George Osborne thinks that then it’s surely not too much to expect a Labour government elected in May 2015 to go at least that far. Furthermore, from £7.00 per hour it’s really not that far to the Living Wage rate (outside London) of £7.65 per hour. So why not make an explicit commitment to an immediate hike in the NMW rate to £7.00 or even £7.50, and to achieving parity with the Living Wage by 2020?

Yes, that would imply making the Low Pay Commission redundant. But perhaps the Commission’s budget would be better spent enforcing the NMW, rather than just talking about it and (mostly) recommending below inflation increases. Government ministers routinely make decisions with far greater economic implications than what the NMW rate should be, and the long-term future of the NMW rate could be secured by writing into legislation an annual uprating at least as great as inflation. It’s really not rocket science.

Tackle the abuse of migrant labour to undercut wages, by banning recruitment agencies that only hire foreign workers

This is the one that really made me want to bang my head against a brick wall. For, leaving aside (for Jonathan Portes and others) the question of whether migrant labour does actually  ‘undercut wages’, the proposed ban is so patently nuts that this clause of Ed’s contract looks like nothing more than a shameful case of dog-whistle politics. Because, if hiring only foreign workers were to become illegal, what proportion of indigenous workers would a recruitment agency have to hire to be legal? One per cent? Ten per cent? Fifty per cent? Fifty-one per cent?

And, were any such arbitrary figure to be (foolishly) enshrined in law, who would police it? Under the Coalition, the BIS Employment Agency Standards Inspectorate has been reduced to a rump of just two inspector-level staff. Would Ed’s contract deliver any more human and other resources for enforcement of new (and the existing) rules?

Again, earlier this week I put these questions out on Twitter, in the hope that someone in Labour might be willing to provide some answers. When they didn’t, I put my questions direct to John McTernan, the fearsome Labour thinker and strategist with the self-appointed task of keeping Tony Blair’s halo shiny and bright. And, whilst first noting that he is “not my brother or sister’s keeper”, John was frank enough to say: “I think there are worse things than foreign workers. Like non-enforcement of [the] NMW”. Hear hear to that.

So, I will keep on posing these (and other) questions, in the hope that someone in Ed Miliband’s team might stop and think these silly contract promises through before they find their way into the manifesto for May 2015. Because, to my mind, that would be a serious mistake that might just blow up in some shadow minister’s face at some point during what is clearly going to be a tough and dirty election campaign. Or maybe Antonia is right when she says the party manifestos “will be meaningless this time because of possible coalition”.

Now that really is a depressing thought.