Britain risks own goal with labour market plans

Post-Brexit Britain would, according to Boris Johnson’s Conservative government, be free to do many things. It would have the opportunity to make laws and regulations that were designed not for the EU as a whole but for the specific requirements of the UK, and to cut red tape imposed by Brussels. Unfortunately, in one of the first significant reforms being contemplated, the government is considering whether to sacrifice worker protections previously enshrined in EU law.

The proposed shake-up of labour market regulations away from the “working time directive” would mark the first major break from EU law since last month’s trade deal was struck. It could become the first test of the deal’s level playing field provisions and spark retaliatory action from Brussels. For British business, it could lead to an end of the 48-hour working week, a change in the rules around rest breaks and the exclusion of overtime when calculating some holiday pay entitlements. The measures would also remove the requirement of businesses to log detailed reporting of working hours.

There are legitimate targets for a government intent on taking cumbersome regulatory burdens away from business, but this is not one of them. The UK already has one of the most lightly regulated labour markets in the OECD in terms of employment protection for individual workers. Nor have employers complained of feeling unduly shackled by EU standards; pre-Covid, the UK’s employment rate was at a record high. Indeed, the majority of workers on contracts that demand more than 48 hours a week are often those in higher-paid positions who have willingly opted out.

Even worse, the proposed move would go against the government’s election manifesto pledge that it would seek to “raise the standards in areas like worker rights” after Brexit. The promise was a key part of the Tories’ appeal to voters in traditional Labour seats and helped the party to secure its victory in December 2019. 

Since taking the reins of the business department Kwasi Kwarteng has made clear he is happy to be an interventionist minister. He has — rightly — signalled that audit reform, a policy area that has fallen victim to the political impasse brought about by Brexit and Covid-19, will be among his early priorities. In a similar vein, the business department under Mr Kwarteng last week also launched last-minute legal action to ban former directors of Carillion from holding senior boardroom positions. The intervention, while unusual, was nevertheless welcome. The former construction giant has been a stain on the reputation of UK business since it collapsed in January 2018. 

It makes sense that post Brexit, Mr Kwarteng, a traditional free market champion, should look at ways to deregulate for business. A new Employment Bill has been promised. There must also be a recognition that, despite the potential for increased paperwork, disclosures and measuring can be important ways to improve conditions. Gender pay gap reporting, for example, has done much to focus attention on the difference between the average earnings of men and women. In a similar way, recording working time is important for recording whether someone is eligible for the minimum wage.

There is much to be said for the new energetic tone coming from the business department. It would be a grave mistake if the aim of this new reforming zeal was merely to pursue deregulation for its own sake as proof that Brexit was worth it. Not only are the proposals far from what business actually wants, but they also risk setting Britain’s post-Brexit course on a race to the bottom. 

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