The Labour government have had a rubbish first hundred days. Skydiving in the polls, a sleaze scandal and a first reset are hardly what anybody expected this soon after a landslide election victory. Yet, with relatively little fanfare, the most impactful mishap could still be ahead of them.
This week’s new employment legislation includes 28 new measures that will make it harder to employ and hamper Britain’s already lacklustre economic growth. The Federation of Small Businesses have warned that these measures are “clumsy, chaotic, and poorly planned.”
Small businesses, with their lower profit margins and smaller scale, will find it challenging to comply with the avalanche of additional red tape. But ultimately, we will all pay the price. The evidence is clear that the new rights to flexible work, paternity, and parental and bereavement leave from day one, however well-meaning, will impose significant costs on businesses that will have to be passed along in lower pay and even higher prices.
The day-one access to unfair dismissal protection could have dire consequences. With this change, many businesses could choose not to hire new staff, fearing the potential for employment tribunals if things do not work out. The compromise, a nine-month probationary period, may assuage some fears, but it will still mean a much heavier burden to remove poorly performing staff.
Despite the government’s rhetoric about growth and productivity, these measures will not make it easier for businesses to employ workers
The new limits on zero-hour contracts will similarly make life difficult for smaller businesses that depend on flexibility as customers ebb and flow throughout the year. Topping it all off, creating a Fair Work Agency with complex guidelines, higher fines and more enforcement powers will also be onerous for small businesses to navigate.
In a classic quid pro quo, the new laws will empower trade unions to donate more to the Labour Party. They will also find it easier to strike and remove “minimum service” requirements, making boosting productivity in the lagging public sector more difficult. This means higher taxes for lower-quality public services.
Britain has historically benefited from a relatively flexible labour market, which helped explain our relatively low youth employment rate compared to European countries like France, Italy, and Spain. Yet recent figures show a concerning surge in workless young people. A shocking 35% of people aged 18 to 24 are not in employment, education, or training. This is a human tragedy on an industrial scale, which will not be helped by these new laws making hiring lower-skilled, inexperienced young people more expensive.
Despite the government’s rhetoric about growth and productivity, these measures will not make it easier for businesses to employ workers — quite the opposite. Many businesses, particularly bigger ones, may stay quiet for fear of offending the new government. They will be happy with plans for further consultation and delays of up to two years. Yet this would be entirely the wrong approach. Britain’s strength depends on businesses' capacity to invest, create jobs and produce more. More red tape is not the route to prosperity.
