Examination of Witnesses (Questions 500-519)
DEPARTMENT OF
TRADE AND
INDUSTRY
18 JANUARY 2005
Q500 Mr Hoyle: Equally or . . . ?
Mr Sutcliffe: Providing the protection
is there and one of the recommendations that has been under discussion
with the Dutch presidency was improved record-keeping for people
using the opt-out so you could evaluate in what sectors it was
being used and if there were abuses, you could deal with them,
issues around the opt-out being sent along with the offer of a
job which we thought were unfair and which we would not support.
I think, used in the right way, in the context of the changed
agenda that we are trying to promote on flexible working arrangements—and
that is why we introduced flexible working arrangements into legislation
and they will be reviewed in 2006—it could equally balance
the employer and the employee within the right framework. The
charge from the trade unions is that in certain sectors there
are abuses. What we have argued is that if they tell us where
those abuses are, we will put conditions in place to stop that.
The opt-out has worked well, it has benefited the UK; clearly
so because of the employment record we have.
Q501 Mr Hoyle: That is why I asked whom
you think it benefits. It seems strange that the employers say
they wish is to keep the opt-out yet the trade unions say they
wish you to follow the other Member States.
Mr Sutcliffe: One of the things
that we have to watch out for here and why I talk about the changed
position that we are in is that we often hear in the UK, and it
is right and proper that trade unions have aspirations for their
membership, that is their role, and what you tend to see sometimes,
that they will cherry pick some of the best, in their terms, European
legislation, but they will not tell you the whole picture. So
they will say that it is easier to get rid of somebody in the
UK than it is elsewhere in Europe. Well, that is not the case.
It is the case in terms that it is quicker, but it is not easier
and it is not more cost-effective.[1]
In the discussions that we are having and why information consultation
is important, in the new agenda, in new relationship, I would
argue that we have to look at the big picture and look at things
in the round, not just cherry pick certain aspects of why a particular
piece of legislation is better in one place than it is elsewhere.
Q502 Mr Hoyle: That does worry me. We
have had evidence before us before, and I respect your views Minister,
but Vauxhall and Ford have pulled out of the UK because it has
been easier to close here and cheaper to close here than in Germany.
We have seen more productive factories being closed because it
is easier. What do you say to that?
Mr Sutcliffe: I do not think it
is easier. I think it is quicker and that might have been part
of it.
Q503 Mr Hoyle: It is easier not quicker.
Mr Sutcliffe: If you look at the
timeframe that is used in terms of the redundancy payments Act
that we have and some of the insolvency legislation that we have,
there is an argument that it could be quicker in the UK. There
is a comparison table which shows the UK is mid way in the range
in terms of European comparisons. Those decisions are commercial
decisions based on a whole range of factors; I do not think those
decisions are based just upon employment legislation or employment
law. It throws up a big problem for us in terms of productivity
issues, the globalisation that we have and the stiff competition
we now face from emerging economies like China and India. This
is why it is important that we have a new approach to industrial
relations and we move away from an adversarial type of discussion
to a more informed approach. That is why information and consultation
are vital. We were opposed to those employers who sacked people
by text message, who do not give employees information about the
development of a company, where a company is going, what the training
requirements are going to be. We all know now that the days of
going into a job at 16 and staying in that same job until you
are 65 are no longer going to be the case, that individuals themselves,
through lifelong learning and development, are going to have two,
three or four careers. There needs to be a new arrangement, a
new deal if you like, between the employer and the employee about
the future of organisations and that is why the Government, through
its economic policies, has developed things like regional development
agencies to make sure we support local businesses in particular
regions.
Q504 Mr Berry: On the specific point
that Lindsay raised about the ease and/or cost of dismissing employees,
if your department has any evidence on this issue that we have
not already seen, we should be very grateful to receive it. Clearly,
you may have some perceptions but what is the evidence out there?
We should like to see what evidence you have on that, because
it would be very helpful to the Committee.
Mr Sutcliffe: We shall certainly
do that. What we can provide you with is not only what happens
in the UK but how that compares with what happens elsewhere and
some of the new legislation which has been considered elsewhere
in most Member States.
Mr Berry: Yes, the comparison issue is
important. Thank you.
Mr Hoyle: Thank you for that. It would
help if you could give us that evidence, especially the Vauxhall/Ford
one, because that would really throw previous evidence in the
bin.
Q505 Mr Berry: A particular reference
to Vauxhall/Ford is the request now from the Committee, if that
is possible.
Mr Sutcliffe: Given the Committee's
wide remit, I think it would be better if we just explain what
the position is in the UK and how it compares with other countries.
Mr Berry: We should be grateful. These
are empirical matters actually and we should like to see the evidence
your department has.
Q506 Mr Hoyle: How to respond to The
Work Foundation's concern that work-life balance policies are
being inserted into an unreformed work environment?
Mr Sutcliffe: We do not necessarily
agree that it is set out quite like that. What we are trying to
do, and I said earlier that employment legislation was a minimum
standard, is to look at the number of people in work now, the
number of people who have been inactive that we are trying to
get back into work, women returners, people who have been long-term
sick or perhaps educational issues. We are trying to get people
back into work by getting employers to offer a different work
pattern. Many employers see the business case for offering flexible
working because of the nature of the labour market and their need
to keep people and retain people. I initially presented awards
at the Parents at Work event which showed, in a whole range
of organisations, how flexible working can be advantageous to
business and can be advantageous to individuals.
Ms Munday: The research we did
after the first year of the duty on employers to give serious
consideration to requests for flexible working has shown that
nine out of 10 requests have been either accepted in full or in
part, which is a significant increase on what was there before
the legislation came along. We think we can say, in respect of
the Work Foundation's work, that this is a moving target and more
and more employers, as parents of young children are encouraged
to make requests, are finding and exploring the benefits of flexible
working.
Q507 Mr Hoyle: Are you satisfied that
businesses are actually embracing flexible working? Do they really
understand there are benefits there, if they were actually truly
to take it on board? Or do you think there is a real reluctance
by business?
Mr Sutcliffe: There is an acknowledgement,
because of the labour market position that we have, that they
have to offer enhanced conditions to people they want to retain
and people they want to get back into the labour market. I think
more needs to be done. That is why I said right at the outset,
that it is about raising the game on all sides in terms of the
representatives of employers and the representatives of trade
unions, to make sure that people fully understand the benefits
to business of getting people back into the labour market.
Ms Parrish: We have surveyed recently
and that showed quite a wide support of their work/life balance
type measures and policies within their workplaces. They see the
benefits of those sorts of practices as a happier workforce, more
retention of high quality of staff and so forth. We also did a
survey three years previously and that sort of appreciation does
seem to be improved. Those people who did introduce or do have
flexible working arrangements have not really found that there
is a huge cost involved. The majority did not find there was a
cost: some found there was a small cost and quite a small minority
found that there were substantial costs. The evidence of understanding
in business is there probably from that survey.
Q508 Mr Hoyle: Maybe not yet, but it
is getting there. Would it be fair to say that?
Mr Sutcliffe: Our campaign that
is out there, is doing very well. As Beatrice said, the morale
changes within the workplace lead to better productivity, less
absenteeism. They are all benefits that can be made to the bottom
line by offering flexible working. We do acknowledge that there
are some sectors where there are greater difficulties than others,
but it is something that we want to pursue and do it from a position
of strength because of the labour market position we have in the
UK.
Q509 Sir Robert Smith: On adaptable working,
is it not time for employers to judge people on their abilities
and not to say because they reach a certain age that they should
no longer be working for them and bring in modern human resources
management and judge people on their merits and not their age?
Mr Sutcliffe: It is and clearly
this is a very difficult issue that government is currently grappling
with in terms of the advancements in medical science. People are
living longer and are able to continue working longer if they
so wish. We do not want to be in a position to force people to
work longer who did not want to work longer. We are looking at
the effects on labour market conditions of people being allowed
to work longer if they so wish. I do agree with you. I think people
should be judged on merit right across the range, regardless of
a whole range of issues.
Q510 Sir Robert Smith: Just as a lot
of industry comes to us saying there is a great skills shortage,
well they have a lot of skilled people at the other end of the
age range, who may want to carry on because they are fit, healthy
and still motivated. It seems very strange to say there is an
age at which, regardless of your ability, you reach retirement.
Mr Sutcliffe: There is, but there
are complex issues around that and I am sure that members are
well aware of those issues in terms of pension entitlement, the
issues around industrial tribunals. We have to look at a whole
set of things to accommodate people working longer. There are
many reasons for the skills shortage as well. The drivers of productivity
are about investment in skills and development and I think this
Government has a proud record in terms of trying to get people
back into work. There are issues around measures of productivity
then, in terms of being able to be more productive with fewer
people in work, but if you get people into work it is about raising
their standards as well. That is why lifelong learning, the issues
around union learning reps and developing people's potential in
the workplace is important as well, so you raise the standard
and get people to raise their own standards for the reasons we
gave about the need to change working patterns because of what
is going to happen.
Q511 Mr Berry: Could we turn to the National
Minimum Wage? Can you give us your estimates of the number of
people who have benefited from the most recent rise in the National
Minimum Wage?
Ms Parrish: We estimate that around
1.1 million workers should benefit from the increase in October
2004.
Q512 Mr Berry: It seems to be the case
that the Government has consistently over-estimated the number
who benefited from previous increases. Independent research makes
this allegation on a regular basis. Do you agree with that? If
so, does that not mean there is scope to raise the minimum wage
even further?
Ms Parrish: There is a combination
of two things which are happening. First of all, in the past statistics
have been revised downwards, so when we are making our estimates
and looking to see how many workers might benefit, official statistics
have been revised down. Probably what is more important is that
we make our estimates and then companies are raising their wages
in anticipation of the national minimum wage. So our final estimates
of how many people have benefited end up being slightly lower
because there is what some people have described as a sort of
snow plough effect. You are getting employers not wanting to be
seen as minimum wage employers, so the rate is announced and quite
quickly people are bringing their increases in, because it coincides
with their pay rise rounds, well before the October increase.
Our estimates probably err on the side of being conservative.
Q513 Mr Berry: That is entirely consistent
with the view presented by one of the trade unions, so that should
cheer you up.
Mr Sutcliffe: The key thing about
national minimum wage is clearly the Low Pay Commission. I think
it was the right and appropriate step to have a commission made
up of all sectors of industry or all stakeholders that were involved.
Q514 Mr Berry: We are still left in the
UK with one of the widest distributions of income in the European
Union. To what extent do you think the minimum wage legislation
has a role in addressing that income inequality or are there other
policies that the Government are pursuing to address it?
Mr Sutcliffe: Clearly the tax
credit situation in addition to the minimum wage has improved
the position for lots of people.
Q515 Mr Berry: What about people on very
high incomes?
Mr Sutcliffe: If you look at the
figures, and I am sure Beatrice has the figures to hand, in terms
of incomes and the growth in incomes.
Ms Parrish: There was a big increase
in dispersion of earnings through the 1990s, but this has stabilised
and in fact very recently we have seen the earnings of the bottom
10% growing slightly faster than the top 10%. Was that your question?
Q516 Mr Berry: It related to my question,
yes. The issue in a sense is that we do have a very high inequality
of income in the UK. Most evidence suggests that it has been consistently
growing over the last 10 or 15 years or so. My question really
was that the national minimum wage and tax credits and so on at
the moment address one end of the labour market, so what about
the other end of the labour market too?
Mr Sutcliffe: Within the department,
the Secretary of State on a number of occasions, as the Chancellor
has, has urged restraint and caution and there are issues that
the department looks at in its discussions with the CBI, with
a whole range of organisations about rewarding success not rewarding
failure. Just on the national minimum wage and the tax credits,
the example I would give is a person with one child who works
full time at the national minimum wage and presently receives
around £6.70 an hour after taking tax credits into account.
It is those relationships that the Committee needs to look at
in terms of raising the pay for people on low incomes.
Q517 Judy Mallaber: The Minimum Wage
Act is meant to cover homeworkers and give protection against
victimisation, but as part of our evidence, the TUC gave us a
submission pointing to a particular case which went to the Employment
Appeal Tribunal, which showed just how easy it is, because of
the status of atypical workers and the legal definitions, for
employers to evade that specifically by inserting a clause in
the contract to show that there was no mutual obligation. As I
was on the Minimum Wage Bill Committee when this was going through,
I find this rather disturbing. It would be helpful to know what
the current position is on the review around atypical workers
and what the possibilities are of getting a single clear definition
of the term "working".
Mr Sutcliffe: On the employment
statute review, clearly we have consulted, are still consulting,
still trying to make decisions relating to that review and we
are hoping to do that in the coming year. There are some very
difficult issues to deal with in that. You will be aware of the
changes that we made in terms of calculations of homeworkers pay,
we worked with the National Group on Homeworking and continue
to do that. There is a lot of evidence around that we are trying
to improve the situation, looking at enforcement issues as well.
Ms Munday: One of the problems
we found with homeworkers is that there is quite a lot of ignorance
about the rights that they do have and therefore it is possible
for them to write those rights away in contracts. One of the things
we are looking at is how we more effectively get information to
that group who are, by their nature, very, very hard to reach.
One of the things we have done is that we have funded the National
Group on Homeworking to employ a worker to try to get out into
this group and make sure they are aware of the rights that they
have.
Mr Sutcliffe: We estimate that
there are about 270,000 homeworkers in the UK and there is a whole
range of issues, not to mention the status and the enforcement
issues around the national minimum wage, in terms of getting to
those workers with advice and support, which are issues we are
discussing with the trade unions as well. It is traditionally
an area where there is not a great deal of trade union membership.
We are actively trying to find the routes in. We are also looking
at other things that can be done. There are the supply chain issues
in relation to organisations and how ethical trade, corporate
social responsibility and issues like that can be addressed in
terms of employment practices throughout the supply chain. We
are looking at a whole range of areas where we can try and be
of assistance. Again, I think this Government has a proud record
in trying to tackle what is a very difficult area for a whole
range of reasons, where some homeworkers themselves do not come
forward because they are frightened of their individual positions
in relation to that homework, which in many cases can be a crucial
part of their income. This is not an easy area to look at and
we are working with the groups Janice has mentioned to try and
improve the situation. It is incremental. We are continually looking
at ways in which we can be of benefit to people. Lots of homeworkers
are in a position where it works for them in the circumstances
that they have and they have a reasonable relationship with the
people who provide homework. What we are always looking at is
this element of exploitation, to make sure that we stop exploitation,
and, through the enforcement of the national minimum wage, where
we have recovered large amounts of money over the years that the
Act has been in place, it will be work which will continue. It
is an important issue affecting the UK labour market. We already
have the gangmaster legislation in place. With the introduction
of migrant workers, with a great resilience on issues around the
lower end of the labour market, we have got to be even more aware
of exploitation that can take place and put in place enforcement
mechanisms to make sure that people are not exploited. We have
done that in terms of advice to Polish workers, to Lithuanian
workers, in terms of areas in the country where they are coming
to work.
Q518 Judy Mallaber: Apart from enforcement
and a number of very positive projects to reach out to homeworkers,
are there not arguments for changing the legal definitions so
there is a clearer single definition of the term "worker"
which could also be phrased in such a way that it would override
specific, clear changes made by employers specifically to evade
that legal definition? That is clearly what has happened in the
particular case quoted, which shows just how easy it is for employers
to do that.
Mr Sutcliffe: That is why we are
taking time on the review. There have been over 400 written responses.
Ms Munday: We are expecting a
response in the foreseeable future.
Mr Sutcliffe: We are hoping to
be able to make announcements this year in terms of that, and
that may accommodate some of the issues.
Ms Munday: To give you another
example, the distinction between self-employed status and other
forms of status is a very key issue for the construction industry.
Things which might seem simple in one sector become more complicated
when you look at another sector, which is why we are still looking
at all the responses.
Mr Sutcliffe: The regional development
agencies are looking at the issue of homeworking as well and,
again, people can be more specific then in geographical terms,
where homeworkers are and some of the issues that affect this.
Q519 Richard Burden: I am going to ask
you about compliance issues, but could I just stay on the homeworking
issue for a moment and ask you whether you are clear that within
your own departments, issues of homeworking relating to employment
are actually sufficiently joined-up with the work you have been
doing on homeworking as far as consumer protection is concerned?
About four years ago, I brought in a Private Member's Bill unsuccessfully,
which was actually about the other end, the consumer end of it.
One of the problems on that is issues about working or homeworking
and it relates to the self-employment issue. At that time, it
was in a sense, being dealt with by the consumer end of things
and employment was kept separate. It seems to me that if the right
kind of attention is going to be given to the homeworking issue,
those two ends need to be brought together a bit. Is any work
being done on that?
Mr Sutcliffe: It is not just our
department and the gangmasters issues threw this up in terms of
the Defra Select Committee report and the different government
departments which had a role to play or a part of a role to play
in the whole of the issue. We are looking across government. I
chair a sub-committee of the Cabinet Committee looking at employment
issues and many of these issues around enforcement, what is happening
at the lower end of the labour market, are being looked at in
a joined-up way. We do not miss a trick in terms of the ability
to look at the enforcement aspect. I agree with you that we have
to make sure that there is a joined-up approach to these issues
and the complexity of the issues around the status position in
terms of where people are.
1 Note by witness: It is cheaper, but not easier
and quicker to make UK workers redundant compared with workers
in other EU countries as a whole. Back
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