
Angela Rayner’s resignation offered Sir Keir Starmer a chance to rethink the policies she was prioritising. Top of her list was the Employment Rights Bill, which, while controversial, she championed very effectively. Her departure represented a golden opportunity for the Prime Minister to reconsider it – maybe even scrap it altogether.
For some time, business groups have been uneasy about the bill. While Rayner was still in post, she could bulldozer her way past those concerns like a political Ilona Maher, pressing on regardless of the opposition. Now she has left the pitch, the question is whether the government will continue to pursue legislation that many in the private sector view as damaging.
It is worth going back to the government’s own analysis of the bill’s potential impact. According to its official assessment, employers would face around £5bn a year in direct costs if the bill came into force. That is not an insignificant amount of money to load onto employers who are already coping with higher national insurance contributions, ongoing uncertainty in the global economy and the pressures of inflation at home.
Yet even those headline figures may be too positive. The assessment relied on expectations of stronger productivity growth and falling unemployment. Both of those assumptions have already been shown to be too optimistic. The document also downplayed the risks to jobs, stating the effect on unemployment would be “small or negligible”. That conclusion looks increasingly questionable.
What is striking is how far removed those official projections are from the outlook of actual employers. The people running businesses are the ones who would have to adapt to the costs and risks imposed by the bill, and their verdict is far more pessimistic.
The Institute of Directors surveyed business leaders to find out what they expected to do if the proposals became law. Nearly half of them said they would scale back on recruitment. Just over half said they would put more money into automation instead of hiring.
Almost a quarter said redundancies would be more likely, while more than a third admitted they would probably outsource more jobs overseas. That last point might be welcome news for business process outsourcers like Target Group – but it is clearly not great news for the UK economy.
As Mark Wallace, the chief executive of Total Politics Group put it in the i newspaper recently, the downsides of the Employment Rights Bill are so large, so clear and so damaging to the economy, it should be ditched – but “while the country cannot afford the Employment Rights Bill, a troubled government with backbench problems cannot afford to anger Angela Rayner”.
The political sands have now shifted. With Rayner out of the picture, there was a chance, briefly, for Number 10 to take another look at the policy she prized above all others. If the bill were dropped, Rachel Reeves would have been in the position to offer employers a confidence boost – a little shaft of light spilling from the Treasury.
The Office for Budget Responsibility might even have been persuaded to improve its economic forecasts, which in turn would give Reeves more room to ease back on some of the harsher measures expected in November’s Budget.
That said, the last day or two has changed everything and anyone hoping for a change of direction looks set to be disappointed.
Listening to the candidates lining up to replace Rayner as deputy leader of the Labour Party, the tone is one of full-throated support for the bill, not retreat. Education Secretary Bridget Phillipson, currently the frontrunner among the six Labour MPs vying for the position, told the TUC conference she would ensure Rayner’s Employment Bill was not watered down, pledging “no ifs, no buts, we will implement the Bill in full”.
Lenders need to take note
The wider economic picture is already deteriorating. While arrears may appear under control for the moment, employment levels are sliding. Reeves’ £20bn tax raid on firms has eaten into profits and new data from the Office for National Statistics shows the number of payrolled employees has dropped by more than 100,000 over the past year. Jobs board Adzuna has reported that vacancies for entry-level positions have fallen to their lowest level in five years.
The Employment Rights Bill will now introduce a raft of measures that make recruitment more expensive and more uncertain. That is likely to choke off hiring even further and drag down the jobs market at a time when it is already cooling. Inevitably, that will feed into a rise in arrears in the future. That’s coming at banks and building societies fast – and when it arrives, unprepared lenders will feel like they’ve been hit by an express train.
Owner occupiers and landlord borrowers will need support. Early contact and remediation are key to keeping repossession a last resort and achieving better outcomes for borrowers and lenders alike. The contest to become the Labour party’s next deputy leader has revitalised the prospects of the Employment Rights Bill and lenders need to invest accordingly.
Amy Morgan is senior leader – marketing at Target Group