Employment Relations Bill, Second Reading

Speech by Malcolm Bruce MP delivered to House of Commons on Wed 14th Jan 2004

The ebb and flow of industrial relations law has been severe in the past 20 years. At times, abuses of union power needed to be tackled and at others, workers' rights were trampled in the dust. There is no doubt that the judgment must be about achieving balance. We shall support the Bill because although we have some reservations and there are omissions, across the piece, it shows evidence of balance. Consultation with employers' and union representatives showed that both groups are happy and unhappy. That suggests that the Government have probably got the balance right.

I have been a Member of Parliament for 20 years and I voted for many of the trade union reforms that the Conservative Government introduced and that I believed were necessary at the time. I make no apology for that. However, I have also stood up and fought for workers' rights. All my life, I have campaigned for works councils and consultation rights, which the Bill introduces. I shall revert to that shortly.

I am puzzled by the Conservative party's position. First, I was intrigued by the statement of the hon. Member for Eddisbury (Mr. O'Brien), who said that the Bill was unnecessary but took 50 minutes to explain why. His argument was characterised by sophistry. He had decided to vote against the measure and was desperately trying to find reasons to justify that, rather than allowing analysis to lead him to his conclusion. Indeed, he constantly referred to issues that Conservative Members would like to tackle in Committee, should the Bill get a Second Reading. The provisions on, for example, implementing the European directive, certainly require legislation.

We believe that the Bill has merit and we shall be happy to support aspects of it. The hon. Member for Hamilton, South (Mr. Tynan) referred to pensions. The Government said that they will give themselves the power to include pensions in the general bargaining rights. However, I agree with him that the experience of the past two or three years has been shocking for many workers and that most people regard their employment package to be pay plus pension rights, including the amount that they contribute, the type of scheme and its benefits. It is difficult to separate pensions from pay and conditions. I hope that the Government acknowledge that. In the current climate, it is hardly surprising that employers resist that, but people have been frozen out of pension funds to which they have subscribed, and there have been differentials so that those who are in a scheme are allowed to continue with it but new employees are given a second-rate benefit.

It is difficult to resist the case that pensions should ultimately be seen as part and parcel of the whole employee package. None the less, I am pleased that the Government acknowledge the case for considering the introduction of legislation in that field.

My party and I take very seriously the cost of implementation and the level and range of regulation. The House, and certainly Ministers, will know that my party believes that there is a prima facie case for abolishing the Department of Trade and Industry. It is an over-large Department with a huge budget, much of which we think could be either deployed elsewhere or taken out of the calculation.

We must take business seriously when it complains about the cost of regulation and bureaucracy, but I am interested that the Conservative party is appealing to a wider public to help it in its efforts to cut public expenditure. My hon. Friend the Member for Weston-super-Mare (Brian Cotter) and I take seriously the representations that have been made, but when one actually asks business representatives which particular regulations they want us to get rid of, they are not very clear or forthcoming. It is all very well to refer to the cumulative effect; I am genuinely happy to sit down with business representatives to discuss in detail how we can simplify or abolish existing regulations. My predecessor in this job, my hon. Friend the Member for Twickenham (Dr. Cable), made some recommendations on that. However, it is interesting that when one engages in discussion with businesses, their complaint boils down to a much bigger criticism of the Treasury than of the DTI. It involves the over-complexity of the tax system that the Chancellor has introduced and the costs of administering that, as well as administering the working tax credit, which keeps changing its name and which has collapsed because its administration is too complicated for not only the business community but the public sector to deliver.

There are real issues there but, as has been said, we have to deal with red tape practically. If there is too much red tape, let us identify it and get rid of it. I certainly pledge my party's support for any measures that could achieve that. It is all very well for the hon. Member for Eddisbury to refer to being against red tape, but if we were to go back to the wonderful days of the free market economy, we would find the freedom to exploit without health and safety rights, workers' rights or holiday rights. The reality is that old-fashioned employers wanted to take work and not have to bargain on sharing the deal. That is why this debate has ebbed and flowed according to where the balance lies. The Conservative party had better think carefully, because its position seems characterised by a return to two simple points: bashing the trade unions and bashing the European Union. If those are to characterise Conservative party campaigning during the next two years, it will go down very well in the Daily Mail, but might not go down as well as the party thinks that it will in constituencies, even Conservative ones.

I turn to the European directive and the need to consult. All my life, I have taken the view that we should get away from the characteristic of having two sides to industry, and build partnerships. That is why my party was in favour of employee share ownership and has always been in favour of works councils and consultation. We therefore welcome the Government's introduction of regulation on that in clause 31. I do not want to be churlish, but I intervened on the Secretary of State to say that we would like the directive to be implemented in full, as early as possible. She gave her explanation, and I have no doubt that getting the balance right there is part and parcel of her consultation with employers, but my party would have liked the UK to adopt that policy many years ago. The reality is that only two countries in the European Union do not have the established practices of works councils and consultation: the UK and Ireland, for which a derogation has been provided.

The CBI has specifically said that that is the part of the Bill that it likes the least, although it must acknowledge that the directive exists and that as members of the European Union—which most of us accept is the long-term future of the United Kingdom, even if the Conservative party does not—we will ultimately have to adopt it because it has been agreed and voted on. The only questions are how and when we do that. It is perfectly reasonable for the business community to say that that will cost it money, and we should not ignore its concerns on that front.

However, the record shows that employers who consult and include their employees generally have a better score on productivity and performance and far fewer disputes. Consulting is a positive virtue. Business must consider that, although there will be a cost in setting up such a mechanism, whether a works council or another system, there will also be a benefit that should substantially outweigh the costs and bureaucracy involved. At the end of the day, that will produce a better informed, better motivated and more constructive work force who will often be able to inform and advise management and help to achieve common and shared objectives.

That is one reason why I support the Secretary of State's judgment on the small business threshold. For consultation, that threshold is 50; for other aspects it is 21. It is not that bad practices exist among small businesses. I know, for example, that members of the union representing the textile industry say that most members of their work force are in companies that employ fewer than 21 people. However, the danger of legislating for such companies is that there are many other sectors in which that would place an excessive burden on small businesses, many of which have, by definition, much better consultation. The theory is that where an employer has 50, or certainly 21, workers, if they do not communicate with those people—it should be possible to talk to every worker every day—they are a pretty bad employer anyway. In general, those small businesses have shorter lines of communication and much better understanding. It is far harder for management to keep the work force in the dark because there are many things that they cannot help but know. The Government are right to take the position that they have taken on that. Although the CBI does not like the consultation, it likes that decision, and we must recognise that the Government had to strike a balance.

We are trying to strike a balance over the mechanism, and over the cost and bureaucracy involved in setting up quite mechanistic procedures. Workers have rights over bullying and harassment, but the difficulty can be in proving that that is happening and getting evidence. It is unfair to characterise the situation as people in small businesses having no rights; they simply will not have the structures that are being imposed here. The justification for that is that the larger the organisation, the greater the danger that the communication channels do not automatically exist and there is not more reasonable redress.

Whatever people might argue about the relative economic performance of the continental economies and our offshore economies, few would argue that, for example, Germany's long-term economic success was not partly founded on the strong consultative mechanisms that we established in post-war Germany, which were part of the driving force behind the German economic miracle. It is a cheap shot for the Conservatives to attribute the difficulties facing the German economy to that, rather than to the consequences and terms of reunification. I am not saying that they are doing that, but there is nevertheless a danger of not acknowledging that we should have absorbed that very positive development in this country.

I have heard many speeches in this House and elsewhere in which people have pointed out that the occupying forces led by the United Kingdom imposed on post-war Germany a federal constitution, proportional representation and worker inclusion in management decisions. Those are three good liberal principles that we would like to adopt in the United Kingdom and which have helped to generate the success of the German economy. The difficulties facing Germany now are completely unrelated.

I am happy for that to have been corrected on the record, and I take no issue with the hon. Gentleman. I still maintain that some people try to attribute the current continental difficulties to what they call European practices, which I think is an unfair misrepresentation of the reasons for the sluggishness of the economy—and there are those who follow the Conservative line of thinking and argue precisely that. They argue that the European way is dragging down the continental economies, and that if we follow suit we will be similarly dragged down.

All I am saying is that I, along with my party, reject that. We should do things in our own way, yes, but a single market cannot be built without commonality, and commonality is not possible without regulation. The real argument is about what constitutes the appropriate level of regulation and how it should be applied. It would help if the Conservative party engaged in that debate constructively rather than giving the impression that they want nothing to do with the European Union—without having the guts to go out and campaign for Britain's removal from that club, and explain the consequences. Theirs is a duplicitous and dishonourable argument, and my party wants nothing to do with it.

Let me say a little about the operation of works councils in practice. A colleague of mine in the House of Lords, Lord Sharman, told me that he was a member of the boards of a British and a Dutch company. The experience was instructive, he said. He gave two specific examples. First, he said that the British company's annual general meeting took an average of 40 minutes, and that virtually no questions were asked. The Dutch company's AGM took four to five hours, and he was vigorously questioned on all aspects of his responsibility. Secondly, he said that Dutch works councils were an important avenue for communication both upwards and downwards. Interestingly, he said that works councils there were not creatures of the trade unions, although most companies were unionised and the unions were certainly involved. They were very much creatures of the employees, and trade union officials would participate in whatever capacity their fellow employees had intended. That is a healthy development that could teach us something here.

What I regret is that the Bill does not deliver all that. All it really does is acknowledge the directive and give powers to the Secretary of State. It leaves open what will actually be done, apart from the establishment of a consultation process at a later date. I welcome that information, but I wish we were further down the track.

In a paper provided by the Library, Warwick university claims that once the directive is implemented "industrial relations in the UK look set to change beyond recognition".

In my view at least, they will change for the better. Warwick also says: "only a minority of UK companies 'even remotely' begin to match the Directive's requirements"— that may be the justification for the phasing recommended by the Secretary of State—and that it "could lead to the establishment of works councils."

I hope that it will. It is said that there was "no mention of whether consultation should be before or after decisions were made."

I sincerely hope that when we reach the clarification stage we will be assured that it will take place before rather than after. Corus, Ford and Vauxhall have been cited today. We all know that consultation may not prevent job losses or closures, but it does ensure a proper, timeous process and at least an opportunity for the exploration of alternative routes, and it enables people to come to terms with what is to happen. As was pointed out by the hon. Member for Greenock and Inverclyde (David Cairns), it is amoral and unjustified to expect people to leave their desks after seven years of service at 20 minutes' notice except in the most dire circumstances, such as the total economic collapse of the business. That clearly did not apply in the case that he mentioned.

We look forward to the legislation. I think that the Government can assume that we shall not just encourage them, but pressurise them. However, I want to mention one more omission. My colleagues and I are concerned about the growth of unofficial action in certain areas, which has proved both frustrating and damaging. We see a danger of legislative lacunae. I do not claim to have a definitive or prescriptive answer, but I can give an example which, I freely admit, triggered my thinking on this.

Several things concerned me about the Post Office workers' dispute in London, Oxford and one or two other places before Christmas. For instance, the union had conducted a ballot for strike action and had lost. It was therefore not authorised to promote the strike, and could not be exempt from its responsibilities if it did so. Strikes then took place. The evidence is anecdotal and subjective, but it seems ironic that the final settlement was negotiated in the wee small hours between union and management, while the unofficial strikers had no representation.

The union might argue that it was so appalled by the taking of unofficial action against its wishes that it wanted to help the management resolve the matter. It might equally be argued that there are occasions on which militant unions can exploit the lacunae in the law and effectively allow—or discreetly encourage, or certainly not discourage—unofficial action to strengthen their bargaining position, while disowning the strike and as a consequence disowning their own liability.

I appreciate that there are legal difficulties in tying the two elements together. However, it seems to me that requiring those who are on strike to go to arbitration will put them in a difficult position if they have no representation—they will have to organise it themselves, which may discourage people from embarking on spontaneous unofficial strikes—and also that there will be problems if penalties short of dismissal can be imposed on individual strikers. The existing law allows for dismissal: management have the right to dismiss unofficial strikers. That, however, sometimes only aggravates management's difficulties. For example, if half the postal workers in London had been sacked because they had been on unofficial strike their employers would have had some difficulty in delivering the Christmas post. A fine or other penalty imposed on individuals might just give pause.

I am merely saying that there is a danger that such practices could develop as a way of getting round existing legislation, and the Government will surely accept that if that happened we would have to deal with it. I am registering my concern that some union leaders operate in that way. I think that what I have said demonstrates that my party will approach industrial-relations issues in an objective and balanced manner. When we believe that union power is being abused, we will stand up for either the consumers of the services involved or the employers of whom advantage is being taken. Likewise, when workers' rights are trampled on by arrogant managements who do not wish to consult or participate, we will stand up for the unions' rights.

We do not agree with the Conservatives. We do not consider the Bill contentious, and we think it provides a useful framework for discussion. We will support not just the Bill but the programme motion—although, as I have told the Government Whip, with the one proviso that we would like to discuss unofficial strikes at an appropriate time.

The Conservatives should consider the position that they have taken. I, certainly, feel able to characterise them not only as anti-EU but as old-fashioned union bashers. I trust that if they take part in the Committee stage—which presumably they will, if the Bill is given a Second Reading—they will do so in a way that ensures that all parts of the Bill are discussed fully and fairly. That is one reason why I will support the programme motion: an agreed programme ensures that every section of a Bill is debated adequately.

I have been in the House long enough to know what Bills without a programme can suffer from. My argument against guillotines has been against guillotines introduced during a Bill's passage, after a long delay, as a result of which major sections of the Bill go undebated. I need no lectures on opposition from the Conservatives, who are only just coming to terms with it. Once they have been in opposition for 20 years, they will understand the difficulties associated with it.

I am aware of that. As I have been accused of being sanctimonious—the comment was made from a sedentary position—let me say that I am perfectly happy to debate on their merits the arguments of the hon. Member for Eddisbury, many of which were fair and constructive. We are entitled to say, however, "Where does that leave his strategy?" It seems to me that he has not made a case as to why the Conservative party is opposed to this Bill. The hon. Gentleman says that we do not need a Bill, but we do. He says that because, according to his party, we do not need the European Union. If we are in the European Union, however, we need legislation to implement the directive. He says that he has never said that, but the reality is that if we need legislation to comply with a directive, we need a Bill.

I have already made it clear that my criticism of the Government is that they have delayed and stalled too long. They have been too dilatory. They are moving in the right direction, not far enough, and not fast enough, but they will have our wholehearted support.