Tracing the path to a New Deal for Working People

In this series of blogposts the Institute of Employment Rights explores various policy dimensions associated with the delivery of Labour’s reform agenda in the domain of workers rights. It argues that while several reform proposals contained in Labour’s Plan to Make Work Pay – Delivering A New Deal For Working People seek to address genuine regulatory failures and a number major concerns faced by workers and unions alike, they sometimes lack in detail and/or occasionally appear to fall short of the policy objectives they appear to pursue. Implementing in full Labour’s New Deal for Working people will require a significant policy delivery effort, spanning well beyond the quasi-emergency legislation that the new executive intends to present to Parliament in the first 100-days of government, in the form of an Employment Rights Bill. Ending the Conservatives’ ‘scorched earth approach’ to industrial relations will not be a quick fix.

Labour’s Plan

The new government is to be congratulated for the commitment in the King’s Speech on 17 July 2024 that it will honour its election manifesto pledge to implement the proposals made in Labour’s Plan to Make Work Pay – Delivering A New Deal For Working People. The document it proposes to deliver is the Labour Party’s 2021 Green Paper, A New Deal for Working People.

Labour’s Plan has set out a series of ambitious goals, which include allowing ‘working people to take their voice back, improve their terms and conditions and ensure protections at work are fit for the world today’, backing ‘stronger trade unions and collective bargaining [as a] key to tackling problems of insecurity, inequality, discrimination, poor enforcement and low pay, and a renewed belief that:

‘strong collective bargaining rights and institutions are key to tackling problems of insecurity, inequality, discrimination, enforcement and low pay. When workers are empowered to act as a collective, they can secure better pay and conditions. Labour is committed to strengthening the rights of working people by empowering workers to organise collectively through trade unions’.

Labour’s Plan is of strategic importance to the broader policy goals pursued by the new government, in particular the objective of delivering economic growth and reducing economic inequalities. Labour’s Plan is unequivocal about it: ‘Labour’s New Deal for Working People is a core part of our Mission to grow Britain’s economy and raise living standards across the country’.  Similarly the 2024 Labour Party Election Manifesto referred to the New Deal both as a policy aimed at ‘kickstarting economic growth’ (page 21) and also at ‘tackling poverty and inequality’ (page 78).

Reducing inequality and boosting growth through labour reform – a longer term approach

For twenty years our work at IER has argued that the attack on trade unions and collective bargaining brought about by legislation and other means has diminished the power of working people to improve their pay, terms and conditions. That is now evident in the stagnant wages, insecurity of income and job, lack of job satisfaction, rising stress and anxiety, and the relentless rise in inequality experienced by millions of working class people.

Removing the legal restraints on trade unions to allow them properly to represent workers through collective bargaining is an essential step in restoring decent working conditions and higher wages to improve the lives of millions., Furthermore, the better incomes brought about by higher levels of collective bargaining increase demand for goods and services which in turn is crucial to achieving Labour’s goal of growth in the economy. It also increases government tax take and diminishes the huge amounts of benefits paid to subsidise low wages. The evidence is now incontrovertible that collective bargaining, in particular,  and trade union rights more generally, contribute both to raising wages (the ‘union premium’) and reducing inequality (through a mechanism known as ‘predistribution’).

In this, as in other respects, the forthcoming Employment Rights Bill will certainly make a significant difference to our 31 million workforce. But fully delivering on the New Deal and on its pledges will certainly take more than ‘100 days’ and, as acknowledged by Labour’s Plan, requires an enduring commitment to delivering policies across the life of the current Parliament. For example, Labour’s Plan suggests that reforming employment status, a central policy commitment since the New Deal, will be subject to a ‘full and detailed consultation’ and only occur ‘within the first year of a Labour government’.^[i] Other reforms, we suggest, will inevitably require an even longer policy cycle.

The first 100 days – some crucial first steps

The Employment Rights Bill will be tasked with addressing what Labour’s Plan refers to as ‘a lost decade when it comes to the world of work’, during which the:

‘Tories have taken Britain down the path of managed decline and overseen the worst strike disruption in decades [leaving] behind a broken labour market and an economy marked by dire productivity, insecurity and low pay.’

In effect the Bill will be quasi-emergency legislation to tackle a number of longstanding regulatory failures, from ‘banning exploitative zero-hour contracts’, to ‘ending the scourges of ‘Fire and Rehire’ and ‘Fire and Replace’’, to making most existing labour rights available from day one on the job, creating a new ‘Single Enforcement Body’, and introducing sectoral bargaining arrangements for adult social care, while restoring such procedures for school support staff.

The Bill will also give ‘voice’ to working people, by ‘removing unnecessary restrictions on trade union activity – including the previous Government’s approach to minimum service levels’ and ‘simplifying the process of statutory recognition and introduce a regulated route to ensure workers and union members have a reasonable right to access a union within workplaces’. These two important commitments are crucial to the broader policy goals of Labour’s Plan and will require the government’s utmost attention to a number of details that we discuss below.

The Right to Strike and the Rule of Law

There can be no effective collective bargaining without an effective right to strike, so it is entirely appropriate that strike legislation is tackled early, and as a matter of urgency.  The right to strike is a fundamental human right protected by many international treaty obligations ratified by the UK. The New Deal proposes major changes to the law relating to industrial action, including the welcome repeal of the Trade Union Act 2016 and the Strikes (Minimum Service Levels) Act 2023.  It also proposes simplification of the notice and balloting rules and the introduction of online and workplace balloting for industrial action.

But important though these reforms may be, they do not fully address the heavy burden of restrictions under which trade unions currently operate.  The restrictions include the inability of unions to engage in sympathy or solidarity action to help others in distress, a power that would have been helpful and ought to have been permitted during the P&O affair in March 2023.

These restrictions go back to the Thatcher era, which the Blair and Brown governments did not reverse.  But it is now time to break free from this controversial legacy.  To this end, the New Deal promised that industrial action law will comply with the UK’s ratified international legal obligations, including the right to engage in sympathy and solidarity action. Labour’s Plan does not denounce this commitment, though it does not mention it specifically.  But conformity with the international standards ratified by and binding on the UK is essential if the ‘inefficiencies and anachronisms that work against cooperation, compromise and negotiation’ in industrial relations and collective bargaining are to be removed.

This is a Rule of Law duty on the State consistently ignored by previous governments. However, it is essential to enhance (no further than international law permits) the (fundamental human) right to strike in order to provide the only lever available to enable some degree of equality of arms in the process of collective bargaining and worker protection.

UK law on industrial action has been held to be in violation of the obligations it has ratified under the International Labour Organisation and the Council of Europe in its European Social Charter. Consequently, significant changes to existing legislation beyond repeal of the 2016 and 2023 Acts are required. Current violations which the Employment Rights Bill will need to reverse are:

• The bar on secondary action, i.e. action against an employer not the employer of the workers in dispute;
• The limitation of pickets to their own place of work;
• The denial of the right to take protest strike action aimed at criticising government economic and social policies (though purely political strikes can be banned);
• The limitation of lawful industrial action to a dispute which relates ‘wholly or mainly’ to the specified industrial matters, instead of being merely ‘connected with’ those items – as in the past;
• The limitation on industrial action in support of workers overseas to situations where UK workers can be shown to be likely to be affected by the outcome of the dispute;
• The limited protection against dismissal for taking strike action because ‘workers who stage a lawful strike should be able to return to their posts after the end of the industrial action’;
• The restrictions on ‘unjustifiable discipline’ which preclude unions from having rules which prohibit the disciplining of members for not participating in lawful industrial action;
• The prohibition on rules permitting use of union funds to indemnify officials;
• The ‘volume and complexity of the legislative change since 1980’.

Trade Union Recognition – giving voice back to workers

The government has identified a number of concerns with the statutory recognition procedure for trade unions seeking to establish collective bargaining arrangements, promising a number of changes to the existing thresholds which present ‘too high a hurdle’.   It has also promised a general review of the procedure, which is long overdue given the relatively small number of claims now being made.   These problems have since been very publicly ventilated following the recent Amazon case, in which the GMB made an unsuccessful claim in the face of resistance by the company.  Despite having the support of 49.9% of those voting in the recognition ballot, the union walked away empty handed.

There is now an urgent need for major changes without the delay of a review if the statutory procedure is to play a part in enabling ‘working people to take their voice back’ and ‘empowering workers to organise collectively through trade unions’.  A union should be entitled to recognition if it can show 10% membership and provide evidence of majority support within a bargaining unit.  Where a union fails to meet this threshold for whatever reason, it should in any event have a right to bargain collectively on behalf of its members (‘members only’ bargaining), if its members so choose. There should be no need for a ballot to secure recognition, minimising the opportunity for hostile employer action.   In addition:

• the current rule banning an application for recognition for 3 years following an unsuccessful CAC application should be revised: six months is long enough given the high turnover in many workplaces;
• the law on unfair (labour) practices should be amended so that it is unlawful for an employer to interfere with the relationship between workers and their trade unions, for example by encouraging, facilitating or inducing them to resign from membership of the union;
• bargaining under the statutory recognition procedure should not be limited (as at present) to pay, hours, and holidays, but should include all contractual terms and conditions (and anything else agreed).

Beyond the first 100 days – worker status

On the question of employment status, Labour’s New Deal expresses a clear commitment to ‘move towards a single status of worker and transition towards a simpler two-part framework for employment status’.   This is legal shorthand for enlarging the class of worker entitled to employment rights (individual and collective) to include all workers other than persons genuinely in business on their own account. The commitment is subject to a ‘full and detailed consultation’ (despite the fact that the matter that has been discussed for years and was the subject of two backbench Bills supported by the Labour Party) and it will take, we are told, at least a year for reforms to be introduced.

Any delay in addressing this fundamental question would be particularly problematic, because many of the ‘first 100 days’ initiatives are interdependent on the question of employment status.   These include the introduction of day one rights, the prohibition of exploitative zero-hour contracts and the ending of fire and rehire. In the absence of a new single and broad definition of worker, many of those needing these protections will be excluded from them and the impact of these reforms will be substantially diminished, while it is clear that a single status would assist with delivering the policy goals pursued by the new government.

The longer term view – collective bargaining and effective enforcement

Data shows that the ability of collective bargaining to reduce inequality and generate growth heavily depends on coverage rates. One of the major challenges facing the Labour government will be precisely how to increase collective bargaining coverage, which once stood at more than 80%, depending on the method of calculation, and which now stands at 40% according to controversial figures produced by the ONS (many think coverage is significantly less).

Although a gradual and strategic roll out of sectoral collective bargaining would be the most effective way of extending and expanding the number of workers protected, the Labour Party has put this plan on hold and is now committing to introduce sectoral bargaining arrangements only for adult social care, restore negotiating procedures for school support staff, and protect national collective bargaining for the fire service.   Important though this will be for the workers in these sectors, it does not begin to touch the wider problem, and falls far short of the 80% coverage that would have applied had the country not voted to leave the EU.

However, the King’s Speech also indicated that besides ‘establishing a Fair Pay Agreement in the adult social care sector’, the government would also ‘following review, assess how and to what extent such agreements could benefit other sectors’. Such an extension would be essential to achieve the Governments macro-economic goals, but also important to deliver on other New Deal policies (e.g. Labour’s ‘National Procurement Plan’ that will ‘ensure social value is mandatory in contract design’, including by reference to ‘recognition and provision for collective bargaining arrangements’). Inevitably this is something that will occupy the government over its first full term and – if taken seriously – will eventually require a degree of administrative support and longer term commitment to policy delivery.

Lessons from P&O – towards an effective enforcement ecosystem

A major test of the new deal is whether it will address the defects of British law which were revealed by the P&O case in March 2023.   This was a seminal moment which highlighted the chronic lack of protection for British workers at the time, and one that demands a major re-appraisal of the British approach to labour law.   The P&O affair revealed rights without remedies and a legal regime that enables employers to choose whether or not to comply with their legal obligations.

The proposals for a Fair Work Agency to inspect, investigate, and enforce workers’ rights is very welcome. It is included among the ‘first 100  days’ pledges.  But if the FWA is to make a significant impact, workers must have genuinely effective remedies. So while the commitment in the New Deal to the removal of statutory caps on compensation is important, agencies such as the CAC and bodies such as employment tribunals must have powers also to grant orders to restrain unlawful decisions by employers, and to make meaningful orders to comply with the statutory obligations. Beyond the foregoing, the FWA must have the same powers as the Financial Conduct Authority and the Information Commissioner’s Office to impose hefty financial sanctions on companies and, in particular, company executives in the case of egregious violations of workers’ rights. This, we predict, will also require a longer term vision and the creation of an ‘enforcement ecosystem’ going beyond the first 100 days in government.

Conclusion – Ending the Conservatives’ scorched-earth approach to industrial relations – not a quick fix.

Labour’s Plan is to “end the Conservatives’ scorched-earth approach to industrial relations”. It is that approach which has led to a significant loss of worker voice, of power at the workplace. The ‘scorched earth approach’ involved placing significant legal restrictions on trade unions, and led to stagnant real wages, inability to resist a cost of living crisis, insecurity of income and employment, increasing in-work poverty, and the inability of workers to have a significant say in determining the conditions under which they work.

The proposals in the King’s Speech are a good start in redressing the balance of power in the workplace, but they are thin on detail in some areas, and unduly modest in their ambition in others.  Most importantly, they are just a ‘start’, and we should refrain from placing on them the unreasonable expectation of delivering the full ambition of Labour’s Proposals and its New Deal. Reforming the UK’s industrial relations will require a long term commitment and policy effort, and trade unions and civil society actors ensuring the full delivery of a New Deal for working people.