Examination of Witnesses (Questions 43
- 59)
WEDNESDAY 11 FEBRUARY 2004
Mr Martin Couchman, Ms Susan Anderson, Mr John Francis,
Mr David Frost and Mr Benjimin Burgher
Q43 Chairman: Firstly, welcome, and thank
you for sending in the documents which you have provided to us;
I must say that I found them extremely helpful and very much to
the point. They differ in that respect from some documents that
come from Brussels! Can I also say that the session here is open
to the public and may be recorded for broadcasting. We will send
you a transcript which you can correct if it is wrong, but we
would like to have it back if possible within seven days because
we are a little bit tight for time if we are going to influence
the Commission. The Commission, as you know, has set a date for
the end of March; we intend to complete our inquiry by the Easter
recess because we want to get our word in fairly early, so please
bear that in mind. Would you like to make an opening statement,
or go straight on to questions?
Ms Anderson: I am director of human resources
policy at the CBI. John Francis is HR at Dixons, and Martin Couchman
is from the British Hospitality Association. Very briefly, we
have given you our written evidence; the key point is that we
believe the individual opt-out is a key flexibility for United
Kingdom businesses but is also valued by employees. We believe
that, of course, individuals should have the right to say "No"
to working more than 48 hours but we also believe they have the
right to say "Yes". We are particularly concerned about
the removal of the opt-out because we think it would amount to
unfair treatment of the United Kingdom. Other EU States exclude
large groups of workers or use collective agreements to secure
flexibility, so we think the opt-out is valuable particularly
in the United Kingdom. Finally, we think there is very little
evidence that workers are being compelled to sign the opt-out,
and there is no evidence that use of the opt-out leads to higher
accident rates. That said, we do think that the Barnard Report
indicated one or two incidences of abuse and we have agreed that
we will sit down with the TUC and the Government to look at those
instances of abuse and see how we can deal with them. That is
all I want to say in introduction.
Mr Burgher: My Lord Chairman, I appear on behalf
of the Federation of Small Businesses. I am part of the employment
group within the Federation. The position of the Federation of
Small Businesses is somewhat unique in that all of the research
which has taken place to date has really been focused on, for
want of a better expression, big business, business with employees
of more than 50 and multinationals and large corporations. It
is clear from the Commission's report that the United Kingdom
is somewhat unique in itself as well in that only 22 per cent
of the private employers have their terms and conditions regulated
by collective agreements. The Federation of Small Businesses'
point on that is that, of that 22 per cent, the amount of employers
with less than 20 employees who are regulated by collective agreement
would be even smaller still, almost be negligible. So the starting
point for the Federation of Small Businesses should be that employees
and employers should be given the opportunity to contract freely
and, to the extent that regulation is necessary, that should only
be called for when the obligation has not been satisfied by other
means. Having said that, there are a number of the issues which
have been highlighted by the CBI. Although the Federation of Small
Businesses are in concurrence that there should not be a removal
of the opt-out, the Federation of Small Businesses would go slightly
further and say that small businesses with less than twenty employees
should have an exemption with a right for employees within those
organisations to opt-in. That would seem to address the main problem
which has been highlighted by the Commission that it is somehow
a vulnerability for employees and has been abused in one way or
the other. Giving the employees a right to opt-in as their own
choice would completely remove any suggestion that there has been
undue pressure at the time of contract and would also ensure flexibility
in relation to both employers and employees.
Q44 Chairman: Thank you. Opt-in is an interesting
idea that you have covered in your document quite specifically.
Mr Frost: The British Chambers of Commerce represents
135,000 businesses in the United Kingdom for the whole of the
United Kingdom. Those businesses are what could be termed SMEs,
small and medium sized enterprises, and our specific point on
this is essentially that our members are fully in support of the
United Kingdom opt-out. That is quite clearly our position on
this.
Q45 Chairman: Thank you. It is quite obvious
from the Commission's document that they are rather targeting
the opt-out. We are disappointed to see their approach, but that
is what has happened—so we have to think carefully about
that. The question I pose is whether there has been any attempt
to quantify the value of the opt-out in comparison with other
factors. We know your view—you think the opt-out is valuable
and so on—but has there been any effort to quantify how
valuable it is to businesses overall?
Ms Anderson: It is quite difficult to put a
quantity on it but we can say that United Kingdom labour market
flexibility makes the United Kingdom an attractive place to do
business. The CBI has done a number of reports now looking at
how attractive the United Kingdom is as a place to do business
and the concern would be that, whilst the vast majority of our
members (70 per cent) still think it is an attractive place to
do business, they are concerned about the extent to which labour
market regulation is eating away at that flexibility. They are
also concerned about the level of regulation, particularly in
the employment area, also in the environmental and the taxation
area. It is the Working Time Directive that is constantly prayed
in aid by those who talk about the excesses, and I think with
very good reason, of European regulation which just does not fit
the United Kingdom and is excessively bureaucratic. We therefore
have evidence of the importance of labour market flexibility.
We did a survey looking at the Working Time Directive, and some
of the case study evidence we have clearly demonstrates just how
valuable working time flexibility is in the United Kingdom, and
that is the opportunity to work fewer hours as well as longer
hours, but I think these case studies which I am happy to leave
with you do demonstrate the sort of problems it would give rise
to if we did not have the working time opt-out.
Q46 Chairman: We would like to see the full
report. You did quote in your document in paragraph 2 a number
of quite interesting percentages showing what people considered
to be the disadvantages for them in quantity, if there were no
opt-out.
Mr Couchman: My Lord Chairman, can I agree with
what Susan said? The British Hospitality Association represents
the hotel, restaurant and catering industry and we have members
ranging from very big public companies down to very small family-run
businesses. Over the last five or six years, the biggest single
source of inquiry we have had on legal issues has been about working
time—there is no doubt it has been the major issue of concern
to people. It is very difficult to say what its direct impact
has been. If anything the Government may have overestimated the
impact when it first came in, but we have done two surveys over
the last eighteen months on the Directive: the first one covered
over a quarter of a million employees and when we asked companies
what they thought the impact would be if the opt-out was ended
and then grossed it up across the industry it came to something
like £200 million a year. Now you cannot put enormous faith
in that figure because it makes certain assumptions about how
companies react and about employees in the market available to
take jobs that would be needed, but significant costs have been
anticipated.
Q47 Chairman: Thank you. You will see from
our declarations of interest that I am a director of Whitbread
with 65,000 employees in the hospitality sector so I do know a
little bit about the effect of the Working Time Directive on many
of your clients, if I may say so!
Mr Frost: From our point of view we do an annual
survey on the costs of red tape and the working time regulation
is, without question, the biggest regulatory financial burden
after minimum wage. We estimate the aggregated total cost today
of over £8.65 billion, and losing that opt-out would obviously
add to that further.
Mr Burgher: As far as small businesses are concerned
it is the administrative, financial and legal costs which would
be extrapolated with the opt-out being removed. Those costs are
not insignificant and negligible to the extent that some small
businesses could not, quite frankly, afford to deal with the administration
and the regulation which is required if the opt-out is removed.
As such, that goes straight to the heart of the competitive issue:
if they are not in business because of the red tape and the legislation
they have to comply with, there is no competition which they can
put forward.
Q48 Lord Harrison: Can I ask Mr Frost to
justify that £8.65 billion for the operating of the Working
Time Directive? Is that still the level given that there were
certain requirements which were done away with in 2000? Do you
have a breakdown of it?
Mr Frost: That is the aggregated total cost
since the introduction to adding year on year, but of course there
are other key points in the Directive in terms of the introduction
of the daily rest period, the introduction of increased annual
paid leave, and already a general introduction on the working
week.
Q49 Lord Harrison: So, to be clear, that
figure contains items like paid leave?
Mr Frost: Correct.
Q50 Lord Harrison: Do you have a breakdown
of the £8.65 billion? Could you send it to the Committee?
Mr Frost: We will. They are the Government's
own figures.
Lord Harrison: They will be even better
then!
Q51 Lord Howie of Troon: Do long working
hours appear in particular sections of the economy or among particular
groups of workers, and are long hours a factor among large employers
or small employers, or is it a mixture of the whole?
Ms Anderson: We have not found there is a small/large
employer split on this issue but clearly there is a sectoral issue.
Construction, transport, communication, agriculture, forestry
and fishing are all sectors where it is commonly known we do have
longer working hours. There is obviously also an issue in terms
of the type of worker and we do find that, again, there can
be splits there—with professional and managerial workers
perhaps tending to work some of the longest hours. Of course,
it is a moot point whether they are covered by the Working Time
Directive or not.
Q52 Lord Howie of Troon: I always thought
a 48 hour week rather short at various activities in my life—not
now, I may say! However, it appears from a number of reports that
the United Kingdom has still got longer working hours than many
EU member countries but also lower productivity. How does that
square with the idea that the United Kingdom opt-out is a vital
factor in United Kingdom competitiveness?
Ms Anderson: Comparing productivity is fraught
with difficulties and measuring United Kingdom productivity compared
with France and Germany, for example, or the States, is difficult,
but I think it is probably commonly accepted that there is somewhat
of a productivity gap between the United Kingdom, France, Germany
and the US. I have another report which I am happy to leave with
you which shows there is a productivity gap but a lot of it is
down to labour force skills, and I think it is true to say we
have been before this Committee before talking about the problems
that we have with skills in the United Kingdom, particularly on
the basic skills of numeracy and literacy, which is bound to impact
on productivity. There are other factors. Capital intensity, for
example, is another key area, where there is a gap but it is not
as big as is often portrayed. The DTI is doing a study looking
into this vexed question of measuring performance and productivity
particularly in the service sector. The issue is sometimes overplayed
and certainly the businesses that we represent think that the
workers they have in the United Kingdom are just as good as the
workers they have in France and Germany, are just as committed
to their work, but the employees themselves like the choice in
working time. No one believes in coercing people but in the United
Kingdom it is about choice and independence and the ability to
choose. We talk to United Kingdom companies who are in a position
to make a comparison on a site-by-site basis and they tell us
that the United Kingdom workforce is just as productive if you
compare a German plant, for example, with a United Kingdom plant.
Mr Frost: On the question of productivity, we
would make two points. Firstly, the number of working hours in
the United Kingdom has come progressively down over the last few
years; there is no doubt there is a productivity gap between ourselves
and Europe but we support the view from my colleague on the CBI
earlier on, that it is a function of both skills and capital investment.
I would point out that productivity is also far higher in the
States and that there is a much longer working hours culture in
the US.
Mr Burgher: The issue of productivity cannot
be specifically linked to working hours. It is clear from the
Michael Porter report that there are a number of issues which
led to falling productivity—namely management skills, technical
skills, education and public policy issues, all of which have
to be put into the melting pot, as it were, to come out with the
conclusion of productivity. It is a little disingenuous to focus
on working hours and look at productivity and come to a conclusion,
as some reports have tried to do.
Q53 Lord Howie of Troon: Are you suggesting
that, because the productivity level is lower in the United Kingdom
than in various other places, people have to work longer in order
to produce the same amount of value added?
Ms Anderson: Sometimes people have to work longer
because you have to do overtime because you cannot get the skilled
workforce, so if there is a shortage of engineers you have to
have people working longer because you cannot get those skills.
Sometimes it is skilled labour there is a shortage of and sometimes
it is lower skills, but if we have not got the work force then
people are going to have to work longer in order to meet the demands
from customers or other businesses.
Q54 Lord Howie of Troon: I am a civil engineer
myself—
Ms Anderson: We need you back in the work force!
Q55 Lord Howie of Troon: But if your people
are not as productive, which is what we are really saying, they
have to work longer. Is that your case?
Ms Anderson: No.
Q56 Lord Howie of Troon: What you are saying
is that, if things were better they might not do, but as things
are they do?
Ms Anderson: Their productivity per hour may
be no different but they are working longer hours in many sectors.
In some sectors it can be to do with lack of investment in equipment
and, if you have more efficient equipment in Germany, that does
not mean our workers work less hard but they are not going to
produce as much because they have not got such efficient machinery.
Mr Couchman: Can I give you two examples on
productivity, one where you can do something and the other where
you cannot? It has been worked out, rather late in the day, that
if you are making beds you can make them more quickly with two
people, one on each side, than with one, yet for years the industry
used to have one person in each room and someone in the next room
making beds. So that is a lesson learned. But, if you are running
a restaurant, for example, and trying to open for lunch and dinner
every day, the chefs cannot do that in less than about eleven
hours' work because it takes that long to prepare, so some things
you can do and some you cannot.
Q57 Lord Howie of Troon: How much shorter
a time do continental workers work than British? I know the French
had or maybe still have a 36 hour week, but is that a real 36
hour week or have they some way of finding overtime in some curious
continental manner?
Mr Couchman: My understanding is the French
are still in the process of introducing that. I have statistics
from three years ago and the French average was the lowest across
all the industries. They were still at 39 odd hours, and I do
not think they have got to 35 all round yet.
Chairman: On the length of working hours
it is quite important that for this purpose, and we are talking
about the Working Time Directive, we base ourselves on what has
happened since we have the Working Time Directive, whereas the
Barnard Report bases itself on the much earlier position of 1993,
where they did not have the Working Time Directive operating in
the same way it does now. We have to be careful what our baseline
is when we talk about long hours—I just make that comment.
Q58 Lord Harrison: Just to secure the point
about the longer hours, Ms Anderson gave the explanation that
if you lack certain skills then the remaining people, employees
who are skilled, have to work longer, and that of course implies
skill shortages here which you have mentioned, but is it not true
that there are skill shortages in our competitor nations like
France and Germany, or are you saying there are not and therefore
your explanation works? It would not work if it is true there
are skill shortages there, because we would be on the same playing
pitch, would we not?
Ms Anderson: There are two elements to skill
shortages. There is the shortage of people and obviously the United
Kingdom labour market is functioning very well and we are drawing,
as we know, more people in from Europe because they are coming
here to take these jobs we are creating, so in Martin's sector
industry is growing but we need more and more people. There are
other sectors where there are skill shortages. We cannot find
enough engineers but there is an issue in that we are not training
enough and if we look at engineers, for example, the German system
has served it very well in terms of valuing the whole scientific,
engineering, vocational route. We have to say we have got problems
but they are sector specific and not across the piece.
Q59 Baroness Brigstocke: One of you was
mentioning not only possibly the fact that some of the basic skills
are a bit weak but also that sometimes managerial skills are,
which is a different group of people. I wonder if you could tell
us something about that?
Mr Burgher: My Lord Chairman, that was a matter
which came out clearly from the Michael Porter report when he
was assessing the impact of productivity on working hours. Within
that report he mentions that the management of the United Kingdom
was less inward looking, and less collaborative of suppliers and
academic bodies; it did not spread its knowledge to organise collective
action—these were a number of factors which were levelled
as criticism against management in relation to productivity. That
is a comparison with the United States and other Member States
in the European Union. They were an example of the managerial
level. We have already discussed the skills gap of engineers and
specific individuals and sectors.
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