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Next Steps in Fairness in Work

The Rt. Hon. John Hutton MP,  Secretary of State for Business, Enterprise & Regulatory Reform
Atlee Suite, Porticullis House, London,  29 May 2008

Good morning.

Hugh Gaitskell, the first chair of the Fabian Society’s economic group, said that the Fabian Society “harnessed the intellectual energies of many younger socialists to the practical issues of policy confronting the party... it brought them together and put them in touch with the older leaders.”

With that in mind, and assuming just for a moment that I am now one of these “older leaders”, I’m very honoured to be invited to speak as part of your important Progressive manifesto series.

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Ten years ago this week, as the legislation to enact it progressed through Parliament, a similar debate was raging over the initial level of our National Minimum Wage.

This was, of course, one of the earliest and most fundamental changes to employment law that this Government made. But as usual the Fabians were ahead of the game. You first called for a British National Minimum Wage over one hundred years ago.

Ten years on from this landmark legislation I think it is a good time to reflect on what our approach to fairness at work should be for the future.

Our approach so far

Around one million workers continue to benefit significantly from the National Minimum Wage, including many low-paid women and part-time workers. And it has made a major contribution to a development not seen in our country for decades. Since its introduction the lowest paid have seen their pay rise more steeply than the pay of most other workers.

In government we often point out that the predictions of those, throughout the last century, who said that this new law would harm the economy and destroy hundreds of thousands of jobs have been proved wrong. And they have been.

Since its implementation, nearly 800,000 new businesses in the UK have been created. The number of people in work in our economy has increased by nearly 3 million. And the total number on benefits has fallen by hundreds of thousands.

The biggest rise in employment has been amongst the groups that started off in the worst position – older workers, lone parents and disabled people – and those who lived in some of Britain’s most deprived parts.

But we should stress more often that the reason we proved people wrong was because of the approach we took for its implementation. Since its introduction, the stated aim of the Low Pay Commission has been, I quote, “to make recommendations that offer real benefits for the lowest paid without endangering their employment prospects or contributing to inflation.”

And to date, the LPC’s recommendations have had the unanimous support of all of its Commissioners – including those representing British employers.

Now that determination to secure greater protection and prosperity for working people, while preserving and enhancing our economic success, has driven our approach to employment law over the last ten years. I say today it remains the right basis on which we should proceed in the future – trying to reach a consensus between employers and employees wherever possible. Balancing fairness with wealth creation.

And we have introduced other important reforms such as extended maternity leave and pay, greater protections for part-time workers and a new statutory right to paid leave with a similar approach for this need to balance fairness with wealth creation.

Phased in, and implemented following consultation with business to ensure we achieve the right balance between employers’ and employees’ interests – a successful approach endorsed most recently by the OECD’s seminal ‘Reassessment of the Jobs Strategy’. It showed that our commitment to an open economy and flexible labour markets successfully combined one of the highest employment rates in the world with the highest average take home pay in the OECD.

Now compare our record, [Political content removed], with other countries whose attitude to labour market regulation and industrial planning are praised by many on the traditional left. In Germany, for example, real wages are still lower today than they were in 1990, when they faced the challenge of assimilating East Germany at the end of the Cold War. Over the same period, real wages in the UK have risen by over 25%.

Just one of the factors that can help families in Britain today face these difficult times of global economic slowdown.

So, it is a recognition of the change in attitudes, brought about by our Government, that while the CBI were once apocalyptic in their forecasts of the consequences of the minimum wage - ten years on, today they have played a key role in supporting an agreement on agency workers.

An agreement that will secure greater protection , and rightly so, for agency workers without compromising the flexibility of our labour market.

Ending the era of regulating

Many people may hope – and some might equally fear – that this agreement is the start of a new wave of employment regulation from government. It is not.

Rather, by tackling an area of potential abuse, which is well documented and which we highlighted in our last manifesto, the agreement on Agency Workers marks the successful completion of perhaps one of our most important objectives - to create now for the UK the right framework of employment protection without compromising our essential labour market flexibility.

How our economy has changed since 1997

We’re all well aware of the changes that intensifying global competition brings for people and business across the world. And of course, also of the massive opportunities offered by these global industries and markets.

Increasing trade liberalisation, especially between large developing economies such as China and India, has encouraged their growing integration into the world trading system. And alongside EU reforms - such as the Single Market and services liberalisation – this has combined with lower transport costs, improved technology and global communications to significantly boost international competition.

The question now, for every country, is how they can best act to ensure their economies and societies thrive in the face of these new economic realities.

Throughout its history – in attitude and action - the UK has shown that it can. And our competitive edge in sectors across our economy including innovation and design, research and development, quality hi-tech manufacturing and business services – I believe, puts us in the strong position to again prosper from relentless global change.

But of course the competition is getting tougher every day.

Prioritising more jobs over new laws

So, more than anything, as we strive for continued economic growth, we need to ensure that our framework of employment rights continues to support the competitiveness of our labour market, and advance the most important employment right of all – that is the right to work.

Exercising the right to work ultimately depends on getting the right balance in employment law. Having a multiplicity of employment rights won’t amount to a great deal if you can’t get a job in the first place.

The best employment policy is therefore one that allows the economy to remain strong and successful and helps businesses to create more and more jobs.

So both here and in Europe - where changing the Commission will see a renewed debate over our future direction - our priority in difficult global conditions must be to ensure that as many people as possible have the opportunity to provide for themselves and their families.

With that in mind, we should make it our top priority to ensure there are no unfair barriers that prevent people getting into work in the first place.

That is why, for example, we have taken steps to ensure that the rules governing the national minimum wage do not prevent benefit claimants who are looking to get back into the labour market from getting valuable work experience. And that the rules on benefit entitlement themselves do not hold people back from getting training.

This raises a wider point that is often ignored in the debate about employment rights – what action should Government take to help people who are in fact moving between jobs? Not everyone, of course in that situation, will need help from Government. Most are capable of sorting these issues out for themselves. But at the very least, we must ensure that employment laws do not make it harder.

If not major new regulation, then what?

But if we have reached the end of the era of considering major new regulation as the best way of improving standards, what then are the next steps for fairness at work?

It is not – as our opponents would say – to sit back and pretend that there are no more problems. And that government has no further role to play in supporting working people.

Because, as the TUC’s Commission on Vulnerable Employment so powerfully has demonstrated, there are huge injustices still to be tackled.

Over the next few months, I will be talking to employers, unions, academics and everyone else with an interest to help identify how best to encourage high performing workplaces; achieve the right balance of rights and responsibilities in a flexible labour market; and ensure fairness, especially for those most at risk of abuse.

Let me set out today my initial thoughts on these issues.

i) Changing the balance of rights and responsibilities

Firstly, if we accept that continually loading new burdens on to business could ultimately compromise the ability of families to provide for themselves, we must re-examine the role of government in the workplace.

In particular, I think there is an urgent need to update and improve the way we think about rights and responsibilities at work.

In future, beyond minimum standards, I think we should place increasing emphasis on government creating the opportunity for workers and businesses to work out what is best for their own circumstances.

This already has its basis in our groundbreaking ‘right to request’ legislation. Giving employees the right to ask, but also crucially ensuring businesses retain the right to say no - if it’s not the best thing for their businesses.

And what we are finding is that far from settling on the legal minimum, a great many employers are seizing this chance to maximise talent – whether by enabling parents to work flexibly or providing training to up-skill their workforce.

So I think here Government’s role is to facilitate that kind of conversation – not always to mandate either side on what should be done. That is why we have announced we will extend the right to request flexible working to the parents of older children up to the age of 16, and are proposing the right to request time to train as well.

ii) Boosting business success by engaging employees

But, secondly, we must consider what more government can achieve over the next decade in that role. One area I want to explore is in encouraging more effective engagement between employees and businesses.

Many companies already recognise that properly involving and developing their employees can boost productivity.

And the Institute for Employment Studies and the Work Foundation’s recent report “People and the Bottom Line” provides, I think, the most compelling evidence yet of the business success that results from companies taking steps to get the best out of their workforce.

It suggests that if a business increases investment by around ten per cent across areas such as skills, employee engagement and making sure that each job fits the particular talents of the employee - it could secure an increase in gross profits per employee of over £1,500 per year.

And government has sought to address this by creating a right for employees to be consulted about major changes in their organisation, through the Information and Consultation Directive passed in Europe.

That has been, I think, a really important step forward – but the limitations of simply creating a new right have been cruelly exposed by the surprisingly small numbers of organisations that have acted to take up these rights.

So we need to better understand what drives some businesses to engage with their workforce and invest in their people more than others.

The benefits it can bring, both in terms of improving business productivity and competitiveness and helping working people get on are clear.

And whether, and in what form, government involvement could effectively help tackle barriers to some companies moving beyond the legal minimums to benefit their businesses and boost our economy.

iii) Effective enforcement

Thirdly, we need to challenge the automatic assumption that the only way to deal with exploitation in the workplace is by passing new laws. I think, this is like using a sledge hammer to miss a nut. Stronger enforcement and action to close any existing legal loopholes that allow a minority of rogue employers to evade their responsibilities and undercut honest businesses, is often the more sensible way to proceed.

This is the principle behind the new Employment Bill now before Parliament, to more effectively target employers who flout the law and underpay staff. Increased resources to support tougher enforcement activity and tougher penalties for breaking the law, I think, send out a clear signal of our intent.

And working with unions, business and other government agencies, we’ve created the Vulnerable Worker Enforcement Forum to help us target and tackle workplace abuses wherever they happen.

The Forum has identified that some abuses are still not being reported. And we all – employers, Government and Trade Unions - have a role to play in putting that right.

But what is certainly not acceptable is a situation where it is the enforcement system itself that ends up turning away those most at risk of exploitation - unable to understand where to go to for help in the first place.

The Vulnerable Workers Enforcement Forum’s final report is due out soon. I don’t want to pre-empt any of the forum’s recommendations but I do make a commitment here and now that we must take action to tackle this problem. In particular, we must look to simplify the enforcement process, wherever possible, and remove any legal barriers that get in the way of justice by preventing enforcement agencies, for example, from sharing information between themselves about potential illegality.

This government will always focus on those most in need. But it is not just the voices of those who are being ripped off in the workplace that need to be heard. All working people want to know that government remains on their side in helping them make progress in the workplace.

In enabling parents to balance work and family life. Ensuring they have the skills and confidence, to move both up the career ladder and between jobs in a world where the prospect of a job for life, as we know, has largely disappeared forever.

iv) Consumers driving up standards at work

Finally, we should consider another critical group that’s too often left out of the debate about improving employment standards – the people that actually buy the goods and services that our workforce produces.

Consumers are increasingly showing that they will buy products and services that go beyond the legal minimums if they are given information to choose. According to a recent Fairtrade Foundation Survey, sales, for example, of fair trade produce in the UK increased by over 70% last year alone. That’s almost a quarter of consumers now regularly buying several fair-trade products.

And the urgency with which major companies address any accusations that they may be making use of sweat shop conditions abroad shows the power of consumers now in the modern economy to force change.

That power can work for British workers too. Last week, I lent my support to the Fair Tips campaign run by Unite and the Daily Mirror – an excellent campaign. Giving people information about whether the tip they leave behind in the restaurant or café or bar, actually gets to the waitress that served them is excellent practice. And major establishments like Pizza Hut and TGI Friday’s have already signed up to this charter of fairness in the workplace responding to growing pressure from consumers.

This is good news for the worker, and I believe the best way to raise awareness of tipping practices which many would consider mean-spirited, even if they remain technically within the bounds of the law.

And the success of this campaign can offer valuable lessons, as we consider whether we can do more to harness consumer power in the years ahead.

Conclusion

So if our mission over the last ten years has been to create basic standards of protection like the National Minimum Wage, beyond which no one should be allowed to fail, our mission over the next decade must be to find new ways to help working people and employers achieve more than the minimum standard.

That means redefining government’s role in supporting businesses and workers. That given the number of times a person is likely to change jobs, helping people move between careers should in the future enjoy equal priority to ensuring fairness in the workplace. And also in recognising the limits too of government action. That it is not possible to legislate prescriptively for everything. That ultimately, in the final resort, there has to be a balance between promoting jobs and prosperity through business success and establishing additional rights in the workplace.

Crucially, it demands we understand that employment rights can only be truly universal if everyone has the chance to work in the first place.

Now, if we can do these things, then I think, the great gains we have secured in making work fairer and more prosperous since 1997 can help lay the foundations, I believe, for even greater prosperity and fairness in the years ahead. Thank you.

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