Blair think-tank calls for ‘tiered employment-protection regime’

The Tony Blair Institute, a think tank and advisory organisation widely believed to be relied upon by the Labour Government for advice, has this week published a report on building a more dynamic economy for a ‘faster world’, with recommendations they believe to be key to jump starting UK growth.

Their report begins with the warning that if growth does not recover, the government will have to resort to costly tax rises or spending cuts towards the end of this parliament. The remedy, in their view, is ‘stimulating economic dynamism’ through a programme that would make a major change to the way employment protections are arranged in the UK.

They make the argument that ‘the current one-size-fits-all system imposes high adjustment costs on roles and companies where long-term unemployment risk is relatively low, discouraging experimentation and expansion in precisely the sectors that drive productivity growth’, going on to make the key recommendation for a ‘Tiered Employment-Protection Regime’.

A tiered regime would replace the ERA’s new measures to introduce unfair dismissal protection to all workers after 6 months of employment, instead with a ‘tiered employment protection’ system which would target what they view as the ‘high and inflexible dismissal costs’ barrier to experimentation and upscaling. They argue that the UK’s comparatively more expensive restructuring expenses (when compared to the US), have held it behind in terms of growth in technology and knowledge-intensive sectors.

It would work by introducing a ‘lighter-touch regime’ where for employees earning over £75,000 a streamlined dismissals process would be in place. The ‘trade-off’ is offset, in their view, by higher pay and stronger long-term earnings prospects from faster-growing firms which would be offered upon choice of an opt-out.

Despite the introduction of the minimum wage over time developing a reputation for being New Labour’s flagship policy achievement, the Tony Blair Institute is now advising caution when setting the National Living Wage, especially in relation to the rate set for under-21s. They also propose to restore the Low Pay Commission’s authority to slow, pause or reverse increases in the minimum wage if they are damaging jobs.

The TUC published new analysis this week showing the urgent need to instead abolish the youth rate and apply the adult national minimum wage for all workers over 18. Their statement comes ahead of the Spring Statement, where the Chancellor is preparing to slow down increases to the youth minimum wage to 2030 following a rise in youth unemployment.