Former Defence Secretary Liam Fox has called on Chancellor George Osborne to announce measures to promote the deregulation of the labour market in his Budget 2012 speech next month. Fox argues that the current uncertain economic climate makes a belief in “untouchable” workplace rights “intellectually unsustainable.”
Business bodies call for acceleration of employment law reform in Budget 2012
In November 2011, the Coalition Government published its published its response to the consultation on resolving workplace disputes, setting out proposals which it described as “the most radical reform to the employment law system for decades.”
The Telegraph reports that a number of business bodies want to see Osborne announce measures to speed up this process of employment law reform in the Budget 2012. For example: British Chambers of Commerce Director General John Longworth says “reforms to employment law [...] must be significantly speeded up,” and IOD chief economist Graeme Leach wants to see “deep reduction of burdens on business.”
Liam Fox: ‘It is too difficult to hire and fire‘
Former Defence Secretary Liam Fox has joined these voices in calling for an acceleration of employment law reform, the BBC reports. Writing in the FT, he argues that in order “to restore competitiveness we must begin by deregulating the labour market.”
Political objections must be overridden. It is too difficult to hire and fire, and too expensive to take on new employees. It is intellectually unsustainable to believe that workplace rights should remain untouchable while output and employment are clearly cyclical.
He also calls for cuts in national insurance contributions:
Although the coalition agreement may require the chancellor to raise personal tax allowances, he should use the proceeds of spending reductions to cut employers’ national insurance contributions across the board. If that is deemed impossible, he should consider targeting such tax cuts on the employment of 16 to 24-year-olds, making them more attractive to employers.
Chancellor George Osborne is scheduled to deliver the Budget 2012 in a month’s time (on Wednesday 21 March 2012).
UPDATE 1 (Thursday 23 February 2012): Relaxation of ‘employment protection laws’ to form part of Budget 2012?
A story in today’s edition of the Independent gives further credence to the idea that George Osborne could outline proposals for changes to the employment law system, as a central plank of next month’s Budget 2012.
The Independent says:
The Chancellor is under pressure from Conservative MPs to relax employment protection laws as part of a “go for growth” package to be included in his Budget on 21 March.
It says that this issue is proving contentious within the Coalition Government:
David Cameron is sympathetic to the backbench demands but they are being strongly opposed by Nick Clegg and Vince Cable, the Liberal Democrat Business Secretary. [...] Mr Cable and Norman Lamb, the new Business Minister, will shortly issue a “call for evidence” on a watered down version of the Beecroft report. This would limit the “fire at will” proposal to the three million people employed by firms with fewer than 10 workers. But the two Lib Dem ministers will make clear they have no intention of turning the proposal into law by stopping short of a full-scale consultation exercise. Instead, they favour an informal, conciliatory approach to resolving disputes between employers and staff accused of poor performance.
UPDATE 2 (Friday 24 February 2012): UK businesses are suffering from ‘oppressive levels of labour protection,’ says the Telegraph. What do you think?
“Dr Fox is onto something [...] in his demands for far-reaching employment reforms.” So says the Daily Telegraph’s Jeremy Warner, in an article entitled Firms will hire more workers if we make it easier to fire them.
Warner argues that UK businesses are suffering from “oppressive levels of labour protection.” In his view, having exhausted all other options for stimulating the economy, “supply-side reform of welfare, employment law and planning is a well-proven path to economic renewal.”
Warner believes we should take inspiration from the US:
It is no accident of geography that the US economy is now making real inroads into unemployment, which in Britain is still rising. In America it is virtually as easy to fire as it is to hire, significantly reducing the risks of job creation.
He says that many business leaders would support such an approach, but are so far afraid to voice their true feelings:
The reluctance of industry leaders to stick their heads above the parapet in part reflects the continued power of ‘big’ business, which has tolerated oppressive levels of labour protection because it has the management systems and market clout to absorb the costs, and also because these protections are a highly effective barrier to entry.
UPDATE 3 (Monday 27 February 2012): Employment protection: Are Liam Fox’s claims intellectually sustainable?
Leading UK HR blogger Rick weighs in with his take on this topic, in an excellent new post on his Flip Chart Fairy Tales blog. Rick argues that “if anything is ‘intellectually unsustainable’ it’s Dr Fox’s argument. There is no evidence that employment law is holding our economy back.” He provides extensive evidence to back up his view.
Here we reproduce the comments on this post submitted by readers of XpertHR Employment Intelligence:
This is not policy; this is politics.
Sacked and silent for a few short months, Dr. Fox is reminding the Tory right that he exists and is keen to return once the red tops have forgotten his ‘innappropriate’ relationship. Now that the restoration of hanging has been lost in the long grass there is no surer way to ignite Tory passion than immigration or employment rights. With immigration off the menu through an absence of work, labour reform is Liam’s soft target to get himself back on the agenda and show Cameron how useful he can be at the next reshuffle.
This tells us only what we already know: Liam Fox is ambitious and the Tory party have a deluded view of labour market economics learned at the bar in local party offices.
Posted by Kevin Ball | February 22, 2012 8:03 AM
I’d first of all like to know who has the belief that workplace rights are untouchable? They’ve always been a hotly contested political issue and have been subject to reform by the Government of the day.
What frustrates me about the debate we are having is that there are very little specifics. A narrative is being constructed that firing people is too difficult and employment law is too restrictive without ever identifying exactly what it is about employment law that is the problem.
The result could be that we legislate not to solve a genuine problem with the law, but to address a perception of the law as it is being portrayed in some parts of the media and by some employer’s organisations. This is just a recipe for bad law.
Unfair dismissal law at the moment requires an employer to behave reasonably when dismissing. If someone wants to argue that behaving reasonably is too onerous a requirement – or wants to point to actual cases where an unfair burden has been placed on employers as a result of how the law is interpreted – then we can have a proper debate about that.
In the meantime, this general talk about deregulating the labour market is just political noise.
Posted by Darren Newman | February 23, 2012 8:56 AM
I totally agree with Darren.
A lot of this is about the perception of employment law, and how it is portrayed in the media and by high profile figures, such as politicians. Judging by Chris Grayling’s comments earlier this week, the people making the decisions don’t even understand employment law. Media reports on employment law matters are often riddled with errors, and that’s even before considering the agenda pushed by various outlets (eg coverage of religious discrimination cases).
Posted by John Read | February 23, 2012 9:25 AM
Completely agree with above comments. As Head of HR for a business that has grown (headcount and turnover) by 50% in 12 months the only difficulty we’ve had hiring has been finding the talent. It’s an absolute fallacy that businesses are reluctant to hire because they are scared of employment regulation.
Are they saying that their judgement is so poor they are incapable of making robust hiring decisions? It’s nonsensical.
I despair at the view that the way to drive productivity, and therefore economic growth, is to implement reforms that excuse employers from managing their staff properly.
If you truly want a productive workforce then treat them fairly.
These reforms would reverse regulations that only seek to remind employers that by treating people fairly you build businesses of engaged, motivated and high performing employees.
If you treat them as untrustworthy disposable liabilities, don’t be surprised if that’s how they act.
Posted by Lorna Leeson | February 23, 2012 10:55 AM
Liam, you haven’t been paying attention.
It’s your arguments that are intellectually unsustainable.
Posted by Rick | February 23, 2012 2:19 PM
You see what I mean? Another article calling for unspecified deregulation. Calling employment laws oppressive but not saying what is oppressive about them. I’d have more respect for a commentator who just came out and called for employers to be allowed to sack people unreasonably or discriminate against them because of their race or religion.
On the subject of which, yesterday saw an Employment Tribunal uphold an employer’s right to require employees to work on a Sunday. When the Telegraph wrote the original story it seemed quite sympathetic to the rights of the employee. Hopefully the decision will be written up by the Telegraph as showing that employment law does in fact allow employers to run their business as they see fit.
Posted by Darren Newman | February 24, 2012 7:21 AM
This whole story is demonstrates quite clearly that the real imperative here is to change the political system and remove idiots like Mr Fox from any role, especially a public one that has any from of responsibility beyond that of perhaps opening the post in the morning.
It is embarrassing frankly to have our politicians appear so public ally out of touch. The root problem here has nothing to do with the law, although I do concede that we have spent the last 20 years lining Pinkerton Smythes’s pockets at the expense of common sense.
The real issue is leadership. To assume business isn’t growing because it’s impossible to get rid of people is total lunacy. Poor leadship creates poor work environments. Poor leadership creates situations that are difficult to deal with.
Some good comments here especially from Lorna Leeson who, remarkable is talking from and employers viewpoint with real experience. I think Lorna knows more about the real “intellectual” issue than Mr Fox don’t you?
Posted by Gareth Jones | February 24, 2012 7:30 AM
There’s no intellectual reason why employment rights should be untouchable. Any law can be reviewed, reformed or repealed if a cogent case can be made. The problem for Liam Fox and his adherents is that there is no sustainable intellectual case to be made that says making it easier to fire workers will boost the economy. Has anyone produced any evidence to prove such an assertion?
Instead, as other people have commented above, this is politics and comes from a man who is probably still smarting from his rather unseemly departure from the Cabinet not so long ago and maybe hoping for a quick return?
The nonsense of the Fox argument is well summed up by Jeremy Warner (a journalist whom I otherwise like reading) saying “Firms will hire more workers if we make it easier to fire them”. Eh? Come again? Have I just gone down the rabbit hole or through the looking glass and am now hallucinating about white rabbits, grinning cats and tea parties? If i think I have no or little employment protection I might decide that it’s better to stash my salary every month rather than doing the public spirited thing and going out and spending it thus boosting the economy.
Posted by Michael Scutt | February 24, 2012 10:31 PM
I totally disagree with what seems to have become the opinion that it is too difficult to fire people. It is difficult to fire people without good reason, but so it should be. Where there are genuine grounds for dismissal it is not difficult. I have never witnessed a situation where a business has struggled to dismiss an employee who is not pulling their weight, at least not when they go through the appropriate procedures.
Posted by Employment Solicitors Bournemouth | March 30, 2012 2:36 PM