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Beecroft report: cutting red tape or delivering more red herrings?

There are only two problems with the Beecroft report from my perspective: the content, and what that content represents.

First, edited highlights on content: in addition to the much debated proposal to introduce no fault dismissal, the report suggests small businesses should be allowed to opt out of regulatory oversight across a range of fields including unfair dismissal, flexible parental leave, child labour and gangmaster licensing, so long as the employer ‘makes it clear to potential employees’ that they won’t have those rights and protections when they take a job.

Beecroft says that ‘nobody would be forced to join a company that had opted out of a regulation’ airily waving aside the notion that people might not understand, might be desperate for a job, or indeed might have their benefits stopped if they refuse to take one.

Not content with this, he suggests that the third party harassment provisions of the Equalities Act be rescinded. This is the bit of the law that means your employer is responsible for making sure that your colleagues and your customers don’t bully and harass you.

Justification for the suggestion? Well, partly that the idea employers can control this behaviour is ‘naïve in the extreme’, and partly the bizarre suggestion that ‘the legislation clearly creates a temptation for employees to conspire with each other or with customers to create a harassment situation’ in order to get compensation from their employer. Um… maybe, but I’m thinking that’s not the primary effect… perhaps it encourages employers to make sure that where harassment in the workplace takes place, it gets addressed?

And so it goes on, with charges for employees who want to bring unfair dismissal claims, further restrictions on damages, making it easier for larger businesses to sack larger numbers of staff (100+ people), getting rid of the Gangmasters Licensing Authority (see here for why that’s a terrible idea), and as an minor aside, implementation of a simplification act for the immigration system (for non- lawyers out there, simplification acts are notoriously not simple).

My problem with the report as a whole is that it is part of the popular story that says our businesses are drowning in red tape, and it is this red tape above everything else that is preventing them from creating jobs and driving the economy out of recession.

In this version of the story, without the protections provided by employment law, there would be lots and lots more jobs. Like many people who tell this story, Beecroft doesn’t try to quantify just how many more jobs we’d have after the bonfire of employment law red tape, describing this as an ‘impossible task’, and instead of evidence citing a ‘growing feeling’ that ‘the price is not worth paying’ for the small business sector.

I could go on and on here, but it’s boring and bad for my blood pressure. Instead here are two graphs:

Employment Protection in 2008 in OECD and selected non-OECD countries*
Scale from zero (least stringent) to six (most restrictive)

(* Data are for 2009 for France and Portugal. OECD average is the unweighted average for the 30 countries that were members of the OECD in 2008.)

So, based on this (via @jdportes) it looks like we already have a pretty flexible workforce. In fact, in the OECD, only the US and Canada are more flexible.

And based on this, (below, from our Monitoring of Poverty and Social Exclusion 2011) we need to create *a lot* of new jobs. As of last year, around six million people were underemployed. Not all of them need or want full time employment, but an awful lot of them probably do.

So ask yourself this. If you were to try to quantify the number of jobs that would be created by reducing employment protections along the lines suggested in the report, what kind of a number would it be? No accurate predictions needed here, just ballpark – how many zeros might it have?

It seems to me that access to finance and a lack of demand might be slightly more important factors in wealth and job creation for the UK economy right now. Not only that, but there is something to be said for regulatory certainty: rather than endlessly fiddling with the red tape, we could leave it alone for a bit so businesses (including small businesses) have time to get their head around it.

Investment in infrastructure, or research and development, even industrial policy, all of these things should be on the table. Reducing our already fairly scanty employee protections on the basis of a ‘growing feeling’? Not the first priority.

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Eric Blair
Eric Blair
11 years ago

It’s a race to the bottom. Declining living standards and rising inequality are now being augmented by removal of hard-won employment protection. The problem is that in order to meet the demands of globalised capital (and no, I’m not a leftie) greater ‘flexibility’ is demanded in the workplace. This begs the following questions: where does this process end? What is it’s logical conclusion? Businesses are struggling because the majority of people in this country are seeing diminishing returns for their efforts and their share of national income has been falling for many years. Add to that big cuts in public spending and it’s no wonder SMEs are struggling. Ordinary people have got less to spend or lack the confidence to spend. So what it Beecroft suggesting? Undermining living standards further – which is what in effect he’s calling for – and further diminishing the confidence which underpins consumer spending.

Fernando Centeno
Fernando Centeno
11 years ago

This makes for a worthy case study; thanks Nancy.

Ultimately, what would be the strategic aim from a public policy perspective? I would negotiate re: private sector concerns from my “public” strategic objectives, reflecting legitimate employee concerns, and try to strike as fair a balance between two competitive interests, such that we see net benefits on both sides of the equation.

Easier said than done, granted, but it makes sense to maintain good working relationships with those we need at the table, at the risk of falling into deeper waters.

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