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Session 2003 - 04
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Standing Committee Debates
Employment Relations Bill

Employment Relations Bill

Column Number: 151

Standing Committee D

Tuesday 24 February 2004


[Mr. George Stevenson in the Chair]

Employment Relations Bill

Clause 31

Information and consultation

9.30 am

Malcolm Bruce (Gordon) (LD): I beg to move amendment No. 49, in

    clause 31, page 27, line 1, at end insert—

    '(1A) The Secretary of State shall consult such persons as he considers appropriate on the establishment of works councils as an arrangement suitable for informing and consulting employees and shall publish the responses received pursuant to those consultations before making the regulations referred to in subsection (1).'.

We tabled the amendment because we are concerned that there has been some resistance within the United Kingdom to adopting what we regard as good labour practices that have long been established in continental Europe. The Liberal Democrats and our predecessor party have always been strong advocates of industrial democracy. Although it has improved a great deal over the past few years, we have regretted the concept of there being two sides of industry and an adversarial, confrontational approach, which did much damage to the British economy, particularly in the 1960s and 1970s.

I accept that such an approach has passed substantially, but during Committee proceedings and our debate on Second Reading we have heard examples of bad practice—to be fair, sometimes by unions and sometimes by management. The European directive requires us to make some institutional changes, which, if adopted in a positive spirit, could consolidate much better relations and set the framework for a more constructive relationship between employers and employees.

We accept entirely that the role of works councils is not a catch-all role. It will not serve all companies and institutions in every way and we would not want to impose it on companies, certainly not when employees have no desire for it and find the present arrangements adequate. Works council practice in other countries has a considerable amount to commend it. When the new European legislation comes into effect, in practice, works councils will probably start to appear in the UK and it would be helpful if the Government created a positive climate to encourage the establishment of works councils in appropriate situations, provide examples of good practice and give guidance on how they can be set up better.

In preparing for the debate, I tried to find more information about the implications of the directive and experiences elsewhere. To be honest, I wish to express a little worry that the Government, not their

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predecessor Government, have been resistant to highly desirable practices about which many of their supporters would probably have expected them to be more enthusiastic. I wish to quote the Minister's predecessor. I am not saying that he made an unreasonable point; indeed, I have a high regard for him. He said that

    ''it was futile to try to use the law to force companies to take employees views on board''.

I find that an astonishing statement for a Labour Minister with responsibility for employment to make. He went on to say:

    ''For workers to be consulted genuinely—ie, we are interested in their views and their views could well influence our decision—you won't do it through regulations. You will only do it through that trust that exists in many UK companies.''

The problem is what we do when that trust does not exist. The argument is that institutions are a mechanism to build that trust. The works council approach is one of those mechanisms that has proved a useful device for bringing management and unions together, as well as employers and employees—unions are not essential for this—to improve the climate of consultation and management.

I said in my opening remarks that we regretted the two sides of industry approach. That is what we got in the reaction to the consultative document: the CBI said that it was deeply disappointed by the agreement in the Government's dossier but the TUC welcomed it, although it wished that it would go further.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): It was about right, then.

Malcolm Bruce: I made a point about that on Second Reading. I am unsure about whether the Government could have been more confident and assertive in encouraging the adoption of good practice.

Examples of where a good atmosphere of consultation would have led to less strife and hardship and better decisions have been well reported, so I will not dwell on them for long. The way in which BMW sold Rover was astonishing. I was a member of Trade and Industry Committee delegation that visited Rover at the time of the takeover. Undertakings that were given were breached, for example on the style of management. When we were in Munich, the management told us that it was so good to its employees that whenever any of them got married the company's habit was to pay a contribution towards the cost of the wedding reception and the bride's trousseau. That wonderful generosity in Bavaria did not fit in well with the decision to sell an acquisition without any consultation. Most of the employees at the Vauxhall plant at Luton heard about the decision to close it on the radio. There was a similar situation in south Wales when Corus decided to make 6,000 people redundant.

There is a marked contrast between what happened in those cases and what happened to Marks and Spencer when it dealt with falling profits by taking a management decision, which I have no quarrel with, to withdraw from the continent. Some people thought that that was an odd decision because the company

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closed its most profitable stores. It decided for core management reasons that it needed to concentrate on its home base. It announced its intention to close those stores British-style, before consulting with the work force. In France, it was taken to court and forced to go through a longer period of consultation and a slower closure process than it had intended.

The most topical current example is the outsourcing of jobs by financial institutions to Asia, and particularly to India. I am on record as saying that it is difficult for us to object to countries with developing economies fighting for and securing jobs for their own people, particularly if we wish the working and living conditions of those countries' people to improve.

With regard to yesterday's announcement about asylum seekers and migrants, if we wish to limit the number of migrants coming to this country, we cannot object when jobs are sourced elsewhere. However, that should be done with proper timing and consultation. Many people have had concerns about companies making announcements to the press, or just giving hints about things, without having any consultations with their employees. Some of them do not go through any process of explaining the rationale behind their decision, perhaps by stressing positive dimensions such as the hope that reinvestment and savings can produce new jobs, which has sometimes subsequently been claimed to be the case, and increase their competitiveness. Some do not explain the time scale in which workers who will lose their jobs will be made redundant and how that will happen. That causes much more anxiety and unease among employees than is necessary, and than good management practice would warrant.

Jim Sheridan (West Renfrewshire) (Lab): The hon. Gentleman makes a good case for consultation between workers and their employers. From my experience, consultation means, ''This is the decision. Let us discuss how we are going to deliver it.'' That gives me great cause for concern. Modern management seem to consult on everything other than the final option. They will consult on how a product can best be produced and on what is wanted in the canteen. There are all sorts of consultation processes, other than on decisions to outsource or to make people redundant.

On the other question about works councils and trade unions, the hon. Gentleman seems to make the case that both are the same. Does the hon. Gentleman accept the fact that independent trade unions also have access to legal opinions and training?

The Chairman: Order. I think that the intervention is developing into a speech.

Malcolm Bruce: I do not regard the role of trade unions and of works councils as coincident. In fact, I think that they should be separate. From the studies that I have made, it seems that although it is common for trade union members and even representative shop stewards to be on works councils, they do that in a completely different persona: in most cases, as

Column Number: 154

employees in their own right and not as trade unionists. Works councils are seen as a distinctive part of the corporate structure, rather than linked to the issue of negotiations about pay and conditions. They are more about consulting the work force about the process of managing and developing the business. I agree entirely with the hon. Gentleman that simply consulting about how people are going to be sacked once that decision has been taken is not the ideal or appropriate way to go about things.

I agree that the climate has changed. There was a popular book in the 1960s, originally published under the title ''Thrusters and Sleepers in British Industry'', which analysed successes and failures in significant sectors of the economy. It concluded that one of the hallmarks of a successful business, although not the only one, was the degree to which a work force were involved in corporate decision making.

One of the unsuccessful sectors identified at that time was shipbuilding. The relationship was appalling. Ships were built next to docks and a dock labour scheme arose out of the most appalling casualisation of labour, which then became almost an abuse the other way. The consequence has been that we have very few shipyards left. Management were not prepared to recognise the dynamics of relating to their work force more constructively and flexibly. There was insufficient flexibility because there was a lack of trust and of consultation, and the business went away from the UK.

As an aside, I recall that in the book one question was about marketing. The managing director of one of the largest shipyards on the Clyde was asked about his marketing department, and he said, ''We are in the 'Yellow Pages'. If people want a ship, they can phone us.'' Not surprisingly, that shipyard closed early in the 1970s.

Jim Sheridan: As a former shipbuilding worker, I can say—I promise that I will wash my mouth out after I say this—that the fall of the shipyards, particularly in Britain, was the fault not only of management but of the workers and the trade unions, who refused to accept change when change was inevitable.

Malcolm Bruce: I agree with that. The thrust of what I am trying to say is that, if there were better institutional frameworks, that kind of divide might not—[Interruption.] Of course the hon. Gentleman is right. Let us remember Harold Wilson's Government. Barbara Castle recognised the problems in the trade union movement and tried unsuccessfully to reform it. Although Labour Members were unhappy about the reforms carried out in the Thatcher years, such reforms—or reforms, at any rate—were needed. That is why my party supported a lot of those reforms; they were necessary to make trade unions responsible and democratic. We can all accept that the climate is more constructive.

I would like the Government to consider whether they could do more to incorporate a recommendation about the role that works councils can play. Perhaps the Government could consult as they have on other aspects, and at least give some steer on what kind of practices would improve matters. I cannot accept their

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argument that it is all about trust and not institutions, because the Bill is about institutional change—giving trade unions rights to represent workers and setting a framework whereby they operate. We suggest that we need more institutional mechanisms that will bring managements that might not otherwise do so to see their work forces as more active partners in the process, as key stakeholders and as principal assets. Such changes should cause managements to work on the basis, which evidence bears out, that workers are usually much more constructive, competitive and flexible when consulted. The net result is that the business benefits.

9.45 am

Warwick university, which has done some analysis of EU law, has the view that employers may feel that it is more efficient to establish permanent consultation mechanisms rather than relying on ad hoc arrangements, and that that could lead to the establishment of works councils. At the heart of the amendment is the question whether the Government's approach will be a soft law one or whether they will be a little more proactive than they appear to wish to be. Currently, we have nothing from the Government about any requirement for the mechanism of setting up a works council or operating one, or about whether such councils should meet monthly, annually or at all. In addition—and this point was made by the hon. Member for West Renfrewshire (Jim Sheridan)—there has been no mention of whether consultation should be before or after decisions are made. It would be helpful if the Government at least gave a clearer steer on how that could develop.

I am concerned that employers tend to react to all these things in a negative way. There have been case studies about hard-line management setting targets for work forces without consultation and getting poorer results than they were getting before the targets were set—that is a lesson for the Government about centrally set targets—then bringing in consultants, getting the two sides together, asking the work force how they can make the business more competitive and finishing up with a better production target and a lower cost per unit than their own centrally imposed targets. When the work force were asked what to do, they had a lot of information, ideas and attitudes.

One of the successes of British industry in recent years—and I say this advisedly—has been the Nissan car plant. It is not a Japanese branch factory but a truly British enterprise that uses British, European and Japanese techniques adapted for the local circumstances. One feature of the factory is a process of almost continuous consultation. Workers are actively encouraged to advise on how they can reorganise the production process more efficiently and are given incentives to do so. The suggestions box is not just a token measure that gets emptied into the shredder now and again: suggestions are read and acted on. Indeed, teams of workers are often invited to try to put together a different way of doing things. Part of that—and this was the interesting thing for me—was to try to avoid any redundancies. Workers in any given part of the factory who create a more efficient

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method of production, which may reduce the work force required by two or three workers, have an undertaking that such workers will be redeployed in one way or another. In that way, the fear of working oneself out of a job has been removed.

The Government have left a hole in the measure, and I want a recognition from the Minister that it would be appropriate to be a little bolder and more ambitious. They should not be prescriptive about works councils but should include them as part of the mechanism for dealing with the European regulation, provide a framework to encourage their establishment and advise people about how much better they can be done.

One of my colleagues in the other place, Lord Sharman, has a lot of experience with a number of different companies, and has told me that he is on the boards of British and Dutch companies. He said that characteristically the annual general meeting of a British company takes about 20 minutes, and the AGM of a Dutch company takes several hours. Both shareholders and members of works councils bombard the management with questions about the financial structure, plans and development of the business. In his view, the net result is a much more positive and productive climate, where the management recognise the work force as part of the company's assets that can increase its net value. That is not always the case here, although it is argued that good companies in the UK attempt that.

This measure to introduce regulations is overdue. I accept that we cannot rush it, but we have lagged a long way behind institutions that make consultation work. The Government should not just implement the regulations using the lowest common denominator, but try to raise the game and attempt to establish something that is much more ambitious and constructive and see whether we can turn the regulation to competitive advantage.

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Prepared 24 February 2004