Busy day at work: the next Minister for #ukemplaw should not be a part-timer

The polls still suggest a close result but, with the Tory campaign in disarray and their supportive press barons suffering a collective nervous breakdown, I’ve started to feel vaguely optimistic that the next BIS employment relations minister will be a talented Labour MP such as Gloria De Piero, Stella Creasy or – if he survives the SNP tsunami – the excellent Ian Murray. And the reported remarks of Labour’s Lord Falconer, that the shadow cabinet has “very, very few” machinery of government changes in mind, has set me thinking about just how long a ‘to do’ list the new BIS minister would find waiting for them on their desk at 1 Victoria Street.

Because, as easy as it is to criticise the Labour manifesto for its lack of ambition on employment law-related reform, and the woolliness (ET fees) and/or daftness (zero-hours contracts) of some of its specific policy pledges, there’s actually quite a lot for a new Labour employment relations minister to be getting on with. In their first 12 months in the job, she or he will need to devote time and energy to some or all of the following work strands:

  • Working out how to translate the high-profile manifesto pledge to “ban the abuse of zero-hours contracts” into meaningful policy action;
  • Initiating the promised process, jointly led by the CBI and TUC, for agreeing reforms to the ET fees regime and – seemingly – the ET system more generally;
  • Working out how to implement a package of woolly pledges to enhance enforcement of the minimum wage (increased fines/penalties for non-compliance, a role for local authorities, a reformed/beefed up Low Pay Commission, and a possible new emphasis on criminal prosecutions);
  • Launching a consultation on “allowing grandparents who want to be more involved in caring for their grandchildren to share in parents’ unpaid parental leave”;
  • Developing a plan to “tackle exploitation in the care sector as a route to protecting staff and improving standards”;
  • Responding to the findings of the Equality & Human Rights Commission’s inquiry into pregnancy and maternity discrimination in the workplace (originally due out in March, but postponed until after the election);
  • Working out how to translate the pledges to “tackle undercutting by rogue employment agencies”, including by “taking action to crack down on rogue agencies that exploit workers illegally for profit”, and to “extend the Gangmasters’ Licensing Authority approach to cover sectors where there is evidence of high levels of migrant labour and exploitative working practices” into meaningful policy action; and
  • Preparing a Bill to legislate as necessary in relation to these and other strands of work.

That’s quite a ‘to do’ list for anyone to cram into five days a week, let alone someone who has a second job as a constituency MP. Yet the position of BIS employment relations minister has always been both a junior and a part-time role – the remit of the Parliamentary Under Secretary of State for Employment Relations and Consumer Affairs currently covers, in  addition to employment relations: Post Office and postal policy; consumer policy and consumer affairs; competition policy; corporate governance; company law; social enterprise; Insolvency Service, including company investigations; and BIS better regulation, efficiency and reform agenda.

So, if Labour are serious about “supporting firms to win the race to the top, not get dragged into a race to the bottom”, perhaps one minor ‘machinery of government’ change they should consider is separating employment relations and consumer affairs, and appointing a Minister of State for Employment Relations. Some of of the above work strands will involve tricky negotiations with HM Treasury, the Ministry of Injustice and other departments, and on ET reform the minister will no doubt need to bang heads together at the CBI and TUC, so it would be handy not to be at the very bottom of the ministerial food chain. And promoting the position to Minister of State level would widen the talent pool from which to select what should be a prominent voice in any Labour government formed after 7 May.

Postscript: As if I hadn’t made the case well enough above, today the following photograph emerged, showing that the current holder of the post is too exhausted from her ministerial duties to notice that her campaign team are holding her placards upside down.

Nosnims

 

Manifesto mania: NMW enforcement not a job for the Home Office

So, we’ve had the Labour manifesto. And the Labour manifesto for Work, the Labour manifesto for Women, the Labour manifesto for Young People, and the Labour manifesto for Black and Ethnic Minority communities. I imagine before 7 May we’ll have the Labour manifesto for Dog Owners, and the Labour manifesto for People Who Listen to the Archers. But today it seems we will get the Labour manifesto for Home Office officials.

According to a report in the Guardian, the main feature of this will be a new “Home Office investigative unit” to target “the illegal exploitation of migrant workers”. This will consist of a “team of more [than] 100 police officers and specialists from the Gangmasters Licensing Authority”, who will be given “new powers to stop the abuse of workers and increase the prosecutions and fines of employers who breach employment laws”.

It’s far from clear how much this new unit will cost, but the Guardian reports “it will be paid for by levying a charge on non-visa visitors to the UK which is expected to raise £55 million”. And the unit will have “one overriding duty”:

To stop the abuse that makes the working families of Britain poorer. This new unit will have the powers and funding it needs to increase the prosecutions and convictions of Britain’s worst employers: those who exploit workers and drag down the wages of everyone else.

All of which glosses over the fact that we already have not one but four public bodies (or units) with much the same overriding duty: the aforementioned Gangmasters Licensing Authority, the national minimum wage (NMW) enforcement unit of HMRC, the BIS Employment Agency Standards Inspectorate (EAS), and the working time directive unit at the Health & Safety Executive. And, to access one or more of these bodies, you have to contact a fifth: Acas.

All of these bodies/units are severely underfunded: HMRC currently gets just £12 million a year to enforce the NMW, the GLA just under £3 million, and the EAS is about five people. And, if you were a government minister with a blank sheet of paper and some £15 million to spend on ‘tackling Britain’s worst employers’, you wouldn’t design a system with four (or five) separate bodies or units. You might, as Vince Cable suggested last year, create a Workers’ Rights Agency (or, say, a Fair Employment Agency), with “the powers and funding it needs” to tackle Britain’s worst employers. (Sadly, that suggestion hasn’t got much further than the inside of Dr Cable’s head, but at least he and the Lib Dems are thinking on the right lines).

So, if you are a new minister on 8 May, charged with the same remit, and have as much as a further £55 million to spend, you really shouldn’t create yet another public body (or unit). And YOU CERTAINLY SHOULDN’T PUT IT IN THE FUCKING HOME OFFICE.

headdesk

[Postscript: here’s the Labour press release on Miliband’s speech]

 

Manifesto manifestations: Labour & Lib Dems offer hope on employment tribunal fees

I had been thinking I would save writing this post until after the main political parties have published their general election manifestos – which, back in the day, surely used to happen at the start of election campaigns? But it’s not often that I get a chance to write about good news and, well, I can contain myself no longer. For, over the past week or so, both Labour and the Liberal Democrats have restated their policy position on employment tribunal (ET) fees with a certainty and clarity that was previously somewhat lacking.

First up was Labour, which chose the afternoon my builders locked me out of my house (so away from my computer) to publish its Better Plan for Britain’s Workplaces (i.e. what normal people might have titled ‘Labour’s Manifesto for Work’). This states:

The introduction of fees of up to £1,200 for employment tribunal claimants has failed. It represents a significant barrier to workplace justice, and has failed to raise any money. Labour will abolish the Government’s employment tribunal fee system as part of reforms to make sure that workers have proper access to justice, employers get a quicker resolution, and the costs to the taxpayer are controlled. We will ask Acas to oversee a process led by the CBI and the TUC to agree reforms to the system.

Which is a significantly clearer (and bolder) statement of policy than that set out in last summer’s National Policy Forum report and first announced publicly if somewhat cryptically by shadow business secretary Chuka Umunna at the TUC conference in September, even if it still fails to answer the question of what kind of fees regime Labour might put in place of the current, “failed” regime. Which is an important question if, like me, you find it hard to believe that Labour would abolish fees outright. Or if you find it hard to believe that “a process” jointly led by a powerful business lobby group vehemently opposed to outright abolition would result in ‘agreement’ on outright abolition. Whatever, the clarification is vindication for those within Labour who have bravely pushed hard on the issue, especially NEC member Johanna Baxter.

However, the revised position also raises some new questions. If abolition of the current, “failed” regime would be tied to completion of a process, led by the CBI and TUC, of reaching agreement on a wider package of reforms aimed at ensuring that “employers get a quicker resolution, and the costs to the taxpayer are controlled”, how long would that take? Weeks? Months? A year? And would the current, “failed” regime continue in the meantime?

Call me picky, but to my mind that would be unacceptable. I suggest there would need to be an interim solution, involving an immediate (and substantial) reduction in the current level of claimant fees. Ideally, that would involve lowering both issue and hearing fees to a nominal level, at which I would hope to see them remain in the longer term as part of a revised fees regime including similarly nominal fees for employers to defend a claim, and a ‘polluter pays’ penalty on employers found by a tribunal to have flouted the law. The CBI has already indicated it could live with nominal fees for claimants, though of course it would have to be persuaded to accept nominal fees for respondents. Whatever, I very much doubt we will get answers to these (and other) questions before 7 May.

Three days later, and with much less fanfare, it emerged that Labour is not alone in tightening up its policy position on ET fees. On 4 April, employment lawyer (and Chair of the Law Society’s employment law committee) Laurie Anstis tweeted extracts from the contributions by each of the three main political parties to the April 2015 edition of the Employment Lawyers’ Association briefing (unpublished, but available online to ELA members, of which I am not one). The ELA had invited the three parties to “provide their manifesto proposals on employment law”, and the briefing sets out responses from Lord Hunt for the Conservatives, shadow BIS minister Ian Murray for Labour, and BIS employment relations minister Jo Swinson for the Liberal Democrats. Laurie has now very kindly provided me with a copy.

The section of Ian Murray’s contribution on ET fees is simply a reiteration of Labour’s previous, somewhat strangled position, now overtaken by the above events. And Lord Hunt hints that a Conservative government would go even further than the Coalition in restricting access to the ET system, as “There is still work to be done to ensure that ‘frivolous’ claims, which cost the taxpayer thousands of pounds in legal fees, are reduced”. There is? Really? But it was the contribution of Jo Swinson that most excited me (no, I never thought I’d write that either :-)). In a refreshingly candid section on ET fees, that is worth setting out in full (with my emphasis added), Ms Swinson says:

Liberal Democrats only supported the Conservative proposal to introduce employment tribunal fees on the basis that a rigorous review would be conducted, within a year of its introduction, to assess its impact and ensure no one was deterred from legitimate access to justice. Since fees were introduced, claims received by the employment tribunal have fallen substantially between July 2013 and September 2014 (notwithstanding the pre-claim conciliation service changing to the early conciliation service in [April] 2014).

Employers know that fees will put many potential claimants off bringing a claim. While I appreciate that many employment disputes will settle out of court, there is a real concern that bona fide claims are being unheard due to workers being unable to afford fees. Two years after its implementation, the Ministry of Justice’s failure to deliver an open and objective assessment of the impact of these reforms is inexcusable. It’s an issue repeatedly raised by myself and my colleague, Vince Cable. There is a clear, necessary and urgent need for this review to take place which goes to the credibility of our judicial system, not just the need for fairness.

There is also scope for tribunals to require the employer to reimburse a successful applicant. Studies have shown that over a third have not received any [of their monetary award] at all. It is absolutely wrong that employees end up paying fees in respect of successful claims for which they will never receive an award. The Liberal Democrats believe that a balance can be struck between managing the costs in terms of time, money and stresses of the tribunal system, and ensuring that employees’ rights are protected. That’s why we would review the level of tribunal fees to ensure that they do not prohibit people from making bona fide claims. A nominal fee could be appropriate to not unduly deter sound claims.

This is music to my ears, both on ET fees and on the shockingly common non-payment of awards, an issue I banged on about for a decade when at Citizens Advice, to very limited effect. Section 150 of the Small Business, Enterprise & Employment Act 2015, which received its Royal Assent in the last week of the Coalition, provides for the imposition of a financial penalty on employers who fail to pay an award (though as yet there’s no date for implementation). And just this week BIS added: “We are also introducing a scheme whereby employers who receive [such] a penalty may be publicly named.” But the next government needs to return to this issue, as there is still more to do, and Labour should think about including it in its proposed ‘reform process’ led by the CBI and TUC (which would, one hopes, include others such as the ELA).

So, I was a very happy bunny over the Easter weekend, and I’m looking forward to reading the Labour and Liberal Democrat manifestos. Normal service will no doubt resume shortly.

[With thanks to Laurie Anstis for granting me permission to include the above extracts from the ELA briefing]

ET fees income from single claimants (wonkish)

Last week’s publication by the Ministry of Injustice of the latest set of quarterly tribunal statistics, covering October to December 2014, was in many ways a damp squib that added little to what we already know about the impact of ET fees since July 2013. ET claim/case numbers continued to bobble along at about one-third the pre-fees level, and the claim outcome percentages – which might have enabled us to pour further scorn on the assertion of Matthew Hancock and others that only weak or vexatious claims have been deterred by the fees – were rendered meaningless by the striking out of one exceptionally large multiple claimant airline case involving some 243,000 claims.

The only real cause for excitement – yes, I’m that sad – was the inclusion, for the first time, of figures on applications for and grants of fee remission (or ‘fee waivers’, as ministers have taken to calling it). From the four tables in Annex D, covering the five quarters up to September 2014, we learnt that 95 per cent of remission grants to single claimants have been for full remission, and only five per cent for partial remission. And we learnt that, while 48 per cent of the single claimants from whom the issue fee was requested applied for remission, only 21 per cent of those from whom a hearing fee was requested did so.

With a bit of work, the figures also allow us to unpack – to some extent at least – the Ministry’s previous statement that gross annual fee income is running at about £12 million, of which some £3.2 million is “foregone in remission”. Because there is enough data spread over the four tables in Annex D to construct the following table for gross and net fee income from, and remission to, single claim/cases (but not multiple claimant cases, or EAT cases) over the 12-month period October 2013 to September 2014.

Issue fee (single claims/cases)
Gross income (£) Remission (£) Net fee income (£)
Type A 619,360 102,720 516,640
Type B 3,906,250 794,000 3,112,250
Total 4,525,610 896,720 3,628,890
Hearing fee (single claims/cases)
Gross income (£) Remission (£) Net fee income (£)
Type A 286,005 25,415 260,590
Type B 3,984,775 1,312,425 2,672,350
Total 4,270,780 1,337,840 2,932,940
Total (£) 8,796,390 2,234,560 6,561,830

(NB – To arrive at these figures, I assumed that the five per cent of claimants granted partial fee remission received an average remission of 50 per cent of the relevant fee.)

From this, we can see that single claimants in the ETs contribute £8.8 million (73 per cent) of the Ministry’s gross income of £12 million, and £6.56 million (75 per cent) of the Ministry’s net income of £8.8 million. And they benefit from £2.23 million (70 per cent) of the £3.2 million foregone in fee remission. The other 25 per cent (£2.2 million) of the Ministry’s net fee income comes from claimants in multiple claimant cases, and appellants to the EAT.

We can also see that, of that £8.8 million contribution to the Ministry’s gross fee income, £7.9 million (90 per cent) comes from claimants making Type B claims (e.g. discrimination, unfair dismissal). Similarly, of the total £2.23 million foregone in remission, all but £128,000 (5.7 per cent) is granted to those making Type B claims.

Well, I think that’s interesting, and if your name’s Michael Reed I suspect you will too. However, in terms of what might happen next, it’s probably much less significant than this tweet, posted on 11 March but which I only stumbled upon today:

Screen Shot 2015-03-18 at 16.04.46

Which conveys a somewhat different message to these and similar tweets by other Labour shadow ministers in recent months:

Screen Shot 2015-03-18 at 16.25.14

Screen Shot 2015-03-18 at 17.46.08

No wonder then, that Sadiq Khan got the following response from junior injustice minister Shailesh Vara when he raised the issue of tribunal and court fees in the House of Commons on Tuesday:

Screen Shot 2015-03-18 at 08.09.31

Followed shortly after by this response from the Lord of Injustice himself, Chris Grayling:

Screen Shot 2015-03-18 at 08.21.32

And then there’s former shadow attorney general Emily Thornberry, who yesterday re-iterated (during her Westminster Hall debate on equal pay) her proposal that equal pay claims be exempted from ET fees for five years – the clear implication being that she would be happy for fees to continue for other claims.

Sadly, working out what the three tweets above, and Emily Thornberry’s proposal, might tell us about the policy on ET fees of any future Labour government is beyond my tiny brain. So I’m going to bed.

NMW enforcement: the politics (and economics) of justice

Earlier this week, Labour launched a press and Twitter offensive against Conservative BIS minister George Freeman, after the latter appeared to dismiss the former’s concern about enforcement of the minimum wage as “the politics of envy”. During a short Delegated Legislation Committee debate on draft minimum wage Regulations on Monday, Freeman had been pressed by Labour MPs Stella Creasy and Stephen Doughty on the number of criminal prosecutions of employers for breach of the minimum wage – just one under Freeman’s government to date. And, towards the end of the debate, Ms Creasy hinted at a surprising lack of knowledge of the enforcement regime on her part when she demanded:

Will the Minister talk us through the consequences to companies of not following the [NMW] regulations? If the number of prosecutions is so low, and those who are named and shamed can bear the brunt of not being popular, is there really any consequence of not paying all those low-paid workers?

The Minister responded:

As I set out in my opening remarks, there are very heavy penalties [for non-compliance]. The hon. Lady may not ever have run a business, but I assure her that for people who do so, fines and reputational damage are a major force for compliance. Prosecutions may satisfy the politics of envy of the Opposition, but they are not the best mechanism to drive compliance.

A crass remark, for sure, but one problem with Labour’s head office and MPs making such a loud and gleeful noise about it is that it invites us to ask what approach Labour would take to enforcement of the minimum wage should they find themselves in government on 8 May.

For, crassness aside, the Minister makes a good point. The criminal prosecution of minimum wage rogues has never been a key element of the enforcement regime, with the Labour government that established the regime itself managing only seven prosecutions in the four years after criminal sanctions came into force in 2006. Indeed, that Labour government had deliberately created an enforcement regime based on HMRC securing compliance (and payment of arrears to workers) through investigation and the imposition of civil penalties, without resorting to resource-draining prosecutions in the criminal courts. So it is at least arguable that every prosecution represents a failure of the enforcement regime, as designed by Labour. In other words, the fewer prosecutions there are, the better.

Certainly, the number of prosecutions is not a very helpful yardstick. What matters most is whether minimum wage-flouting employers believe there is a real risk they will be investigated by HMRC. And that depends upon the financial resources made available to HMRC for intelligence gathering, inspections, and investigations.

In any case, the inescapable fact is that criminal prosecutions are at least 25 times more costly than a standard investigation by HMRC. According to official figures cited in the Trust for London report Settle for nothing less, a criminal prosecution costs at least £50,000, while the average HMRC investigation costs just £1,850. So, if prospective ministers such as Ms Creasy want there to be more criminal prosecutions from 7 May, they will either have to come up with (a lot) more money, or face presiding over a substantial cut in the number of HMRC investigations.

To date, there has been no indication from any shadow minister that Labour would increase the spend on minimum wage enforcement – which the Coalition has recently increased by an impressive 50 per cent, from £8 million in 2013-14, to £9 million in 2014-15, and a budgeted £12 million for 2015-16. Indeed, Vince Cable and Jo Swinson have steadily shot most of Labour’s minimum wage enforcement foxes: naming & shaming is (finally) gearing up; the maximum civil penalty has been increased from £5,000 to £20,000; and, as I’ve noted previously on this blog, that maximum penalty will increase again to a more than adequate £20,000 per underpaid worker just as soon as the Small Business, Enterprise & Employment Bill becomes law. Poor Labour MPs are left waving little more than a meaningless pledge to ‘increase’ the maximum penalty to £50,000 (per employer or per worker, no one’s thought it necessary to spell out).

So, do Labour plan to reshape the enforcement regime, with a new emphasis on (expensive) criminal prosecutions? I put that question to Ms Creasy and Mr Doughty on Twitter, but they didn’t respond. I guess it’s easier to make fun of hapless government ministers than it is to explain what you’d do differently if you were sitting in their ministerial chair.

Postscript: Ms Creasy appears to have read this post, but has not (yet) taken the opportunity to explain the extent to which criminal prosecutions would feature in a Labour government’s approach to enforcement of the minimum wage.

Labour losing race to the top on employment rights policy

So, the supposedly free-market Tories have had their Stalinist-sounding ‘long-term economic plan’, and now Labour has a ‘better economic plan’. Towards the end of the latter, a chapter entitled ‘Supporting firms to win the race to the top, not get dragged into a race to the bottom’, states:

Too often it is assumed that the only way for firms in sectors such as retail, hospitality and social care to compete is by cutting employee pay and conditions. But many firms in these sectors want to be able to compete through higher skill, higher wage business models, without being undercut and dragged into a race to the bottom.

The [Coalition] Government has actively encouraged a race to the bottom by weakening the UK’s enforcement regime and promoting a hire-and-fire culture: doubling the qualification period for unfair dismissal, introducing fees for employment tribunals, and setting up a controversial scheme whereby employees trade their employment rights in return for a share in the company.

[Labour’s new industrial strategy] is about giving employers the tools they need to raise standards, and also protect them from being undercut, by raising the minimum wage, ending the abuse of zero-hours contracts, and making it illegal to use agency workers to undercut wages and conditions.

Bafflingly, there’s no further mention of – let alone any pledge to reverse – that doubling of the unfair dismissal qualifying period. Nor is there any mention of Labour’s previous pledge to reform the tribunal fees that have done so much damage to the ‘enforcement regime’. Given that employer lobby groups such as the CBI and FSB have openly called for the hefty fees to be substantially lowered, this is an astonishing omission from what is clearly intended to be a business-friendly document.

Indeed, once you cut through the rather repetitive references to ‘the race to the bottom’ and ‘raising our ambitions for the domestically-traded sectors’, there are precious few commitments to policy reform that might actually help achieve the plan’s lofty goals. Apart from reiterating both welcome plans to “encourage more employers to pay a living wage” and the disappointingly modest pledge to “increase the minimum wage to £8 an hour before 2020”, the 80-page document sets out just three broad policy pledges specific to “reducing the pressures employers face to get dragged into a race to the bottom”:

1. Banning the abuse of zero-hours contracts: giving workers on zero-hours contracts new legal rights to be protected from employers forcing them to be available at all hours, insisting they cannot work for anyone else, or cancelling shifts at short notice without compensation, and giving workers on zero-hours contracts who are actually working regular hours week-in week-out a right to a contract with fixed minimum hours. We will also introduce a new Acas Code of Practice [on zero-hours contracts].

This is all very well, but – as I’ve previously noted elsewhere and the document itself recognises just two paragraphs later, in relation to enforcement of the minimum wage – there is no point having rules if they are not enforced. And, presumably, the only way to enforce these proposed new rules would be for individual workers to pursue a tribunal claim against their abusive employer. Which very few workers would be likely to do, even without the fees of up to £1,200 on which the document is so surprisingly silent. So, new Labour ministers could huff and puff all they like, but their shiny new rules wouldn’t blow many rogue employers down.

2. Tackling undercutting by rogue employment agencies: taking action to crack down on rogue agencies that exploit workers illegally for profit – for example through a licensing system that ensures agencies are complying with basic standards or stopped from operating; extending the Gangmasters Licensing Authority approach to cover sectors where there is evidence of high levels of migrant labour and exploitative working practices; and closing the loophole in the Agency Workers Directive that allows agency workers to be used to undercut employees.

This is more encouraging, even if it is somewhat ill-defined. However, both the employer lobby groups and past Labour ministers have been strongly against extending the GLA’s licensing regime to other sectors – with good reason. And, since 2010, Coalition ministers have reduced the BIS employment agency standards inspectorate to a rump of just three staff. So it’s not at all clear who Ed Miliband, Rachel Reeves and Chuka Umunna think would do all the cracking down. In short, there’s a lot of work yet to be done on this policy pledge if it’s to become more than a vague sop to the TUC, which has stuck rigidly to its call to extend the GLA regime.

3. Ensuring proper enforcement of the rules: there is no point in having rules if they are not enforced. Under this Government, the number of inspections into whether the National Minimum Wage was being paid has more than halved and there have been just two prosecutions since 2010. There is widespread agreement that better enforcement would support employers that play by the rules. Labour will improve this by: increasing the fines for breaching the minimum wage to £50,000; extending the remit of the HMRC minimum wage unit to cover holiday pay; giving councils a role in enforcement; and trebling the fines for knowingly employing illegal migrants.

The last of this third set of policy actions is little more than dog whistle politics, but there’s a good case for capitalising on the local, front-line knowledge of councils in order to improve enforcement of the NMW. And extending the HMRC unit’s remit to cover holiday pay is something I suggested in 2011, as an obvious first step in incrementally fusing the HMRC unit and the GLA into a genuine fair employment agency; more recently, it was a recommendation of the June 2014 report on low pay by Alan Buckle.

But Labour are kidding themselves – and the voting public – if they think that increasing the maximum penalty for breaching the NMW to £50,000 will have more than a marginal impact. For the penalty is set at 100 per cent of the total arrears owed, and in all but a handful of cases that sum is relatively small, and certainly well below £50,000. For example, among the 162 NMW-flouting firms named and shamed by BIS to date, including the tranche of 70 named today, the total arrears owed – and so the penalty imposed – was less than £10,000 in 154 cases, and exceeded the current maximum of £20,000 in just four cases. And, as they each involved a number of workers, those four cases would have been more than adequately covered by the Government’s proposed new maximum penalty of £20,000 per underpaid worker, set out in the Small Business, Enterprise & Employment Bill and almost certain to become law before Parliament is dissolved on 30 March.

Of course, Labour could increase the penalties by increasing the penalty rate from 100 per cent of the arrears owed to, say, 200 per cent. But that’s quite different to what Labour are saying they would do, and might be quite hard to justify when, in the vast majority of cases, the total sum owed in underpayments is relatively small, and the employer is a (very) small business. Among the 162 firms named and shamed by BIS, the average underpayment per worker was just £306.11, and no fewer than 35 of the 162 firms are hairdressers or beauty salons. We’re (mostly) not talking big corporates here.

All in all, Labour’s ‘better economic plan’ is depressingly short on credible, fully-formed (and costed) policy ideas for halting the race to the bottom in pay and working conditions. The good news is that I’m available to help sort that out, and my daily rate is a lot less than Jack Straw’s.

Waiting for your call, Chuka.

 

 

 

 

 

 

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.