Select Committee on European Union Twenty-Second Report


Chapter 1—Setting the scene

202.  We recommend this Report to the House for debate.

Chapter 2—The development of 21st century labour markets

203.  We conclude that most of the issues raised in the Green Paper are already adequately addressed within UK labour law where the labour market is relatively lightly regulated in comparison with some other Member States.

204.  In consequence, we recommend that it would not be helpful to introduce new EU wide changes to labour law since this would not meet the specific circumstances of the UK nor of other individual Member States.

205.  We consider, nevertheless, that the Green Paper provides valuable insights into the role of labour law in promoting labour market flexibility and in enhancing the genuine employment security that comes from helping people to cope with structural change. In addition, we welcome the focus it provides on what individual Member States might learn from the experience of others when deciding what reform of labour law or other employment and welfare policies might best help them to meet the economic and social challenges of the early 21st century.

Chapter 3—Labour law and the UK economy

206.  We accept the evidence that the UK's relatively light employment protection legislation, by facilitating a high degree of numerical labour market flexibility, has benefited the UK economy (although we recognise that this has not necessarily been a major factor in the improved performance of the economy in recent decades). This has helped the UK to avoid the high unemployment and labour market segmentation witnessed in some other EU Member States, notwithstanding the problems of structural unemployment and social disadvantage suffered by some people in this country.

207.  We recommend that the problems of structural unemployment and social disadvantage in the UK need primarily to be addressed by measures directed at tackling poor skills and social inequality, and by enforcing existing labour law where this is being flouted, rather than by changes to labour law.

208.  It was clear from our evidence that, whatever the overall success of the economy, there remains a major problem for the UK in relation to labour productivity. Our view is that significant changes in labour law can have either a positive or a negative, but only marginal, effect on productivity. We conclude that, to improve the UK's productivity performance appreciably, the priority needs are:

Chapter 4—Flexibility and employment security—"flexicurity"

209.  We commend the Commission for starting, in the Green Paper and elsewhere, an important policy debate on how labour market flexibility and employment security might be combined and reinforced to the benefit of both employers and workers and in furtherance of the common good.

210.  However, we recommend that the purpose of this debate should be primarily to share information and examples of good practice, recognising the diversity of circumstances between Member States identified by the report of the Commission's Expert Group on Flexicurity. Any common principles of flexicurity agreed at EU level should therefore be interpreted as guidelines rather than as obligations.

211.  We recommend also, that as far as the UK is concerned, progress toward enhancing flexicurity requires action on skills and welfare to work measures rather than changes in labour law.

Chapter 5—The need for labour law reform and the role of the EU

212.  We conclude that the present framework of individual labour law in the UK strikes a fair, efficient and sensible balance between the rights and responsibilities of "employees" and "workers".

213.  We agree with the Government that any change in this framework would create difficulties for employers without providing any substantive advantage to workers and possibly harm employment prospects. The focus of attention should therefore be on informing all workers of their rights and enforcing existing entitlements.

214.  We recognise the important role played by trades unions and collective machinery in helping to ensure people are treated fairly at work, are able to exercise their legal rights, and can make a productive contribution in the workplace. However, we see no need for action at an EU level to directly alter the scope of collective labour law in the UK or other Member States.

215.  We fully appreciate the particular pressures facing smaller businesses in coping with an increasing amount of labour law which may seriously hamper their ability to create jobs and improve their performance. We therefore recommend that the Government should pay serious attention to the concerns of small businesses about the impact of employment protection provisions on their operations. We would not, however, wish to see any groups of workers, including those working in the smallest businesses, left without the employment protection which is afforded to workers in larger organisations.

216.  We do not believe there is need for more convergent definitions of worker in EU directives. We also firmly reject any suggestion of a common floor of rights, although we do not consider this to be the intention of the Green Paper. The UK already provides a sensible floor of rights covering all workers and any changes to this legislative floor should be left for the UK to decide for itself.

217.  We recommend that efforts at EU level to affect the broad frameworks of labour law within Member States should be planned to promote the sharing of experience and good practice, rather than to introduce new legislative interventions.

Chapter 6—Issues for groups within the labour market

218.  We recommend that in the UK, the agency should continue be treated as the primary employer of agency workers and that agency workers should retain their current status in law. There is no strong case for change in the current regulation of agency work, the existence of which benefits employers, agency workers and the UK economy as a whole.

219.  We conclude also that there is no strong case for any change in the definition of employment and self-employment or the extension of employment rights to those deemed genuinely self-employed. We recognise, however, that in the UK the distinction is complicated by tax authorities sometimes adopting a narrower definition of who is self-employed than Employment Tribunals or courts. We recommend that, so far as possible in practice, the Government should clarify this position.

Chapter 7—Addressing labour market disadvantage

220.  We have noted the high rate of transitions between different forms of employment and contractual status within the UK labour market. We conclude that whatever market segmentation does exist is explained primarily by social disadvantage, caused by lack of basic skills and qualifications, rather than by barriers created by labour law.

221.  In the UK context, therefore, we recommend that measures to improve employability, rather than modernisation of labour law, should be the main priority of government policy toward the labour market.

222.  We are greatly concerned by evidence of the exploitation in the UK of vulnerable groups, especially migrant workers. We conclude, however, that the appropriate course is to tackle abuse where it occurs and to provide vulnerable and migrant workers with information about their existing legal entitlements.

223.  We welcome the action taken by the Government during our Inquiry to consult on the introduction of measures which would help to strengthen the employment protection in the UK of vulnerable groups of workers by creating better enforced and more effective penalties for employers' non-compliance with National Minimum Wage legislation and the Employment Agencies Act. We will take a close interest in the outcome of this consultation and in the effectiveness of any new measures which result from it.

Chapter 8—EU Legislation: its formulation in Brussels and its implementation in the UK

224.  We are persuaded that that the current social partnership consultation arrangements for formulating EU legislation have an exclusive "two sides of industry" feel.

225.  We recommend, therefore, that the Government should support UK small business organisations in finding means to ensure that social dialogue in the EU includes a wider representation of interests, in particular representatives of the small business sector. This would seem the most appropriate way of making sure that the EU matches up to the spirit of its treaties which state that the EU should avoid imposing administrative, financial and legal constraints on small and medium sized enterprises.

226.  We recognise that the perception remains strong that the UK "gold plates" EC directives relating to employment. However, we have seen no conclusive evidence to support this view and indeed the final report of the Davidson review suggests that the perception is exaggerated. We recommend no further action on this matter.

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