Examination of Witnesses (Questions 101
- 119)
THURSDAY 26 APRIL 2007
MR OWEN
TUDOR, MS
HANNAH REED
AND MR
RICHARD EXELL
Q101 Chairman:
Mr Tudor, Mr Exell, Ms Reed, thank you, all three of you, for
coming before us today, it is very nice to see you here and we
are grateful for your time in helping us to come to some conclusions
about the Commission's Labour Law Green Paper. Thank you also
for your written evidence which we have in front of us now. Obviously
employment issues are of great interest to this Committee and
you will be aware that we published our report on the Working
Time Directive a couple of years ago. Our inquiry into the Labour
Law Green Paper is therefore a good opportunity for us to pull
together evidence which will bring our views on the impact of
legislation in the labour market up to date. We are fortunate
to have Professor John Philpott, whom I expect you may have met
before, helping us with this inquiry as our specialist adviser.
Now, there are a few housekeeping points. We have an hour. The
session is open to the public and it will be recorded for possible
broadcasting or webcasting. A verbatim transcript will be taken
of your evidence and that will be put in the public record in
printed form and on the parliamentary website, and you will be
sent a copy of this transcript a few days after this meeting to
check it for accuracy. Please advise us of any corrections as
soon as you can. If you wish you can submit supplementary evidence
after the session. Sometimes we spend a little longer on one question
than maybe we ought to or something like that so a question does
not get a full response or maybe does not get asked, so if you
would like to expand or clarify what you have said we are happy
to receive supplementary evidence. The acoustics in this room
are good but you do need to speak a little bit above your normal
speaking voice. Could you start by stating your names and your
official titles for the record?
Mr Tudor: I am head of the European Union and
International Relations Department of the TUC.
Ms Reed: I am Senior Employment Rights Officer
at the TUC.
Mr Exell: I am an economist at the TUC.
Q102 Chairman:
Do you want to make a statement at the opening of this meeting?
Mr Tudor: If I may, just a very brief one, so
we can summarise the main points of our interest in this area.
We believe that flexibility on its own is not the route to economic
success. Flexicurity has been successful in Nordic economies but
we would contend that what the UK has is not flexicurity. We do,
indeed, have high levels of employment which is welcome, but we
lack the security that characterises Nordic economies, and therefore
have vulnerability, and skill levels are not high enough. What
the TUC wants to see is fourfold: firstly, more high value skilled
jobs because they provide more security in the global economy
than low value jobs do; we want to see the extension of employment
protection in practice as well as in law to vulnerable workers;
higher levels of social protection to enable people to switch
jobs when necessary; and, finally, better worker representation
arrangements to assist in the restructuring process. We believe
this would represent a development of the current social dimension
of the European Union which we believe is vital to ensuring that
Europe's people support globalisation.
Q103 Chairman:
Thank you, and that leads us straight into our first question
which is exactly about the Anglo-Saxon and Nordic labour models,
which you contrast one with the other, and the differences between
them, and that opinion seems to be shared by the Green Paper as
well. I wonder if you could summarise your concept of the labour
market systems in Nordic countries and describe what you see as
their advantages as a model for other EU Member States? Do you
know anything of the views of trades unions elsewhere in the European
Union as to the relative advantages of the Anglo-Saxon and Nordic
models of labour markets?
Mr Exell: We tend not to use the phrase "Nordic
model" because there are differences between the different
Scandinavian countries, but having said that there are enough
similarities, I think, to talk about them in general terms. Probably
the best known theorist of the Nordic model is Professor Gosta
Esping-Andersen, and he suggested that it is characterised by
high levels of social protection, equality of opportunities, a
labour market policy directed towards full employment, and high
levels of growth. From a British perspective what is also noticeable
about it is higher levels of unionisation than we have in this
country, higher levels of collective bargaining, higher levels
of taxation and much more generous social security benefits. The
advantages from our perspective are, firstly and most importantly,
that the existence of the Nordic countries and their success shows
that you do not have to trade off the aims of reducing poverty
and achieving employment growth; both are compatible. Also, the
emphasis on high levels of training is a route that is more likely
to succeed in an era of globalisation than Britain's weak performance
on training. In terms of union attitudes, there are differences
across Europe in attitudes to the Nordic model. Various national
trade union centres might prefer some aspects of their national
model to the Nordic model but, generally speaking, the European
trade union movement regards the Scandinavian countries as setting
the gold standard. John Monks as General Secretary of the European
TUC has described the Scandinavian countries as "outstandingly
successful". I remember Jean Lapeyre when he was Deputy General
Secretary of the ETUC saying that Sweden was where every trades
unionist turned to at night in prayer before going to sleep! Equally
what I would say is I have been active in European trades union
affairs for 15 years now and I have never met a single European
trades unionist who regards Britain as the model.
Chairman: That was pretty comprehensive.
Are there any supplementaries on this, because it is quite an
important question?
Q104 Lord Wade of Chorlton:
There are lots of things we could explore because what are you
judging it by, from whose point of view? Is everybody happier?
I do not know. What are the down sides? Clearly there are some.
Mr Exell: There was a recent survey that found
that Denmark was the happiest country in the OECD—
Q105 Lord Wade of Chorlton:
There are lots of other reasons.
Mr Exell: Undoubtedly there are problems but
most of them are problems of success, so for instance Sweden—and
this is why I was saying there are differences between different
countries—has a high level of gender segregation in its
labour market which we would not regard as being ideal. Roughly
speaking men work in the private sector and women in the public
sector, which means that women's jobs are particularly vulnerable
to changes in government, so no system is going to be without
problems, even from our perspective, but generally speaking we
would rather have their problems than ours.
Q106 Lord Wade of Chorlton:
If everything was perfect, what would you guys have to do?
Mr Exell: That is a very good point!
Q107 Baroness Howarth of Breckland:
I know the Nordic countries somewhat and environmentally they
are very different places from this country. We have to remind
ourselves that the suicide rate in Northern Scandinavia is higher
than in most places so I do not know how that measures in terms
of happiness, and there are other holistic issues if you look
at the whole community and I just wonder how you see those differences.
Just looking at England, let's not take the UK as a whole, with
its immensely dense population, it is a very different environment
from Sweden—
Mr Exell: Absolutely.
Q108 Baroness Howarth of Breckland:—so
do you not see that there are some of those issues when you are
looking at employment and, indeed, employment law that underpin
a very different environment? I suppose we are looking at your
views on how we get the best here, recognising that we want to
get to the gold standard, in a very different place.
Mr Exell: Yes, and indeed in Sweden they are
building on 69 years of social partnerships since the famous 1938
agreement between the employers and the unions, and you cannot
transfer a system of industrial relations that is built on generations
of trust lock, stock and barrel to a country that does not have
that experience, so we would say that the emphasis on employment
as the key to dealing with poverty is very much in tune with what
all the political parties in this country are saying at the moment,
but which the Scandinavians pioneered, and the emphasis on promoting
employment through social systems and social security, and the
attempt to build up not just a high quality education and training
system but a learning society. I do not know about Norway and
Denmark but I know that in both Sweden and Finland that is very
much an emphasis there, and in Sweden the proportion of adults
involved in adult education is astounding, I forget the exact
figures but over half the adult population is involved in some
form of adult education, and very often self-directed as well,
which is an interesting point. People set up their own learning
circles and sometimes hire in a tutor to help them; it is a fascinating
model. Finland, of course, has the most successful schools system
in terms of literacy in the world, though it is very interesting
in that it is remarkably difficult to put your finger on what
it is that is creating that success. Finnish children do not start
school until they are seven and many of them arrive at school
able to read already, and it has been suggested that it is the
fact that there are so few television programmes available in
Finnish so they get used to reading the subtitles on the children's
television programmes.
Mr Tudor: I am not sure we have an evidential
base here!
Mr Exell: So there are directions that we can
learn from but it would be ludicrous to say that we just want
to import the agreements that you have between employers and unions
in different sectors, for instance.
Chairman: I think we need to move on.
Lady Uddin?
Q109 Baroness Uddin:
All this happiness just overpowered me into thinking about some
of the rationale and about how inclusive some of that policy may
be. Would you agree or subscribe to the view that many of these
countries that you mentioned may be quite happy and people may
be quite full of happiness in some quarters but the record of
disadvantages to particularly minority groups and others is not
so good as in Britain. Do you feel that not only would we not
want to get their model here but that maybe we have something
to give back to some of the countries that you mention?
Mr Tudor: I think that is true although I would
also note, and this is possibly apocryphal but it is illustrative
of the general feeling, that the Swedish Fascist Party in the
1990s advocated reducing Sweden's take of refugees to the UN recommended
limit, and this would therefore put the Swedish Fascist Party
considerably to the left of any party in most of the rest of continental
Europe! We also know that studies done by our colleagues in Sweden
show that in a country with phenomenally high levels of unionisation,
and joining unions is one example of social inclusion, the highest
group of unionisation was among women borne outside Sweden who
had moved to Sweden and joined unions in greater numbers than
even domestic Swedes, which I think suggests there is a level
of inclusion there that is worth looking at. That said we do not
consider it possible, let alone necessarily desirable, to try
and reproduce any of the Scandinavian countries in the UK. There
are lessons to be learned, however. The Treasury published a report
last year which indicated that it could see the Swedish model
as being better than the British model. For the Treasury to accept
anybody does anything better than the Treasury strikes me as surprising.
Chairman: I think we should move forward.
Q110 Baroness Greengross:
Could you just summarise what you think about the role of labour
law in EU Member States? Why do you think the EU Commission should
focus more on bringing forward proposals for labour law in the
field of collective rights, and do you think that your views on
this are the same as other trade unions in other Member States?
Ms Reed: In terms of summarising the role of
labour law, it is the same today as it has always been. This is
to protect workers from arbitrary treatment by employers and from
unfair treatment, and to prohibit discrimination in work places,
whether on grounds of race or sex or disability or sexual orientation
or, now, age, and also to provide workers with voice to enable
them to exercise some of their democratic rights within the work
place as they do in the rest of society. However, we also recognise
within the TUC that labour law can have real benefits for employers
and for the economy as a whole. We need look only at the introduction
of enhanced maternity rights within the UK and equal treatment
rights for part-time workers, which have had real impact in terms
of increasing women's participation within the labour market.
There is also evidence that the national minimum wage, for example,
has improved recruitment and retention benefits for some employers.
So there are benefits of labour law for all parties. The question
that we would hope that the Green Paper would address, however,
is what is the best mechanism for achieving these objectives.
We know across most of the rest of Europe that social norms and
minimum standards within the work place are achieved through collective
bargaining, through social partners working together, and obviously
in the UK compared to many other European Member States we have
low levels of collective bargaining. We believe, therefore, that
we are losing out on some benefits within the UK. The TUC takes
a clear view that collective bargaining offers real flexibility
for organisations. We just need to look at the issue of working
time, for example. Social partners, trade unions and employers
have a good track record of sitting down and negotiating working
time arrangements which meet both the needs of organisations and
also the needs of working parents who want to have more time to
accommodate their caring needs and their family needs. Also we
believe that providing workers with a greater sense of voice and
therefore buying into organisations means that they are more likely
to trust their employers, particularly in the context where change
is on the horizon with increased pressures from globalisation.
If workers feel they are being listened to and that they have
a stake and can influence how organisations adapt and change in
the light of increased competition. That enables workers to have
a greater sense of loyalty and motivation. Therefore the TUC in
our response to the Commission did call on the Commission to look
at increasing and extending collective rights across Europe, particularly
in the area of information and consultation in the context where
restructuring is on the horizon. We also think in the light of
a series of cases that are currently going before the ECJ, the
Laval and Viking cases, where in some countries
social protection models, particularly the Nordic ones, are being
challenged under competition law principles, that there is a role
for the Commission to protect and promote fundamental rights for
trade unions to organise and to be able to bargain collectively.
That is not just a principled argument; we believe there are real
economic benefits from such an approach.
Q111 Lord Wade of Chorlton:
Just for clarification, what do you mean when you talk about collective
rights in the sense that they are not there now? Surely any two
parties have a right to negotiate? What is it that stops you from
doing that? What do you see is the handicap in the system?
Ms Reed: Certainly employers and trade unions
can voluntarily reach collective agreements and can negotiate
in work places. But there has been a sense since the 1980s that
there is no encouragement maybe for collectivism within the UK.
We do welcome measures that the Government has introduced since
1997, particularly statutory rights to recognition and information
on consultation rights, but there is evidence that those rights
have holes within them and therefore there are not the levers
that trade unions can use to bring employers who are really reluctant—
Q112 Lord Wade of Chorlton:
So what you want to do is check the balance of power, which is
slightly different from a collective right.
Ms Reed: We want to strengthen rights for trade
unions but on the basis that there are real benefits for employers
and for the work force by talking through issues, working through
problems relating to—
Q113 Lord Wade of Chorlton:
I would argue that is a different point from saying what we want
is a system where we work together, because there is nothing to
stop you working together. What you are saying is you want to
move the balance of power from one side to the other side.
Ms Reed: We believe the role of the law is to
provide a framework which encourages and enables the social partners
to discuss together. Ultimately what is included within a collective
agreement and the relationship between trade unions and employers
is a matter for both parties. But our concern is that at the present
time the framework of law does not provide sufficient support.
For example, the real concern we have is in relation to cornflake
redundancies, as some general secretaries call it, where employers
will announce over the radio first thing in the morning that a
plant is closing and thousands of jobs will be lost. That has
a devastating impact not only on the financial lives of those
individuals but also often on communities. We believe there should
be clearer laws that require employers to sit down and talk with
trade unions well in advance of making such an announcement public,
so that both sides can seriously consider alternative options
for the future of the organisation, whether there is need for
restructuring in terms of working hours or whether there is need
for increased training so staff are capable of taking on new roles
or functions. Our concern is that too often in the UK employers
still take the quick route of simply saying: "We are going
to lay off large numbers of staff" and do not consult with
trade unions in advance.
Q114 Lord Trefgarne:
Is the closed shop widespread in Scandinavian countries? I guess
it is. What would be your view on that if it were to be re-introduced
here in some cases?
Ms Reed: The closed shop was ruled as being
unlawful right across Europe so any country that operates a closed
shop would be in breach of the European Convention on Human Rights
potentially. However, I think in many other European Member States
that individuals recognise the benefits of trade union membership
and that being part of the collective in their work place, not
only in terms of having access to better information about what
is going on in the work place but also having a greater voice
in terms of future restructuring of organisations.
Q115 Lord Wade of Chorlton:
I would like to explore this whole issue of productivity and labour
law and perhaps some other issues as well, and I think you would
agree that it is accepted that productivity in this country could
be better and if it were better we would all be better off as
a result, so I would like your views on that really, both on how
it applies to the UK and how any change in labour law could improve
it, and also on the European context.
Mr Exell: Thank you very much for that question.
Our position on productivity is one that we developed together
with the CBI six years ago. In 2000 the Chancellor set the TUC
and the CBI a productivity challenge, and the next year we produced
a report on it and we said essentially that there are four issues
in the UK where we need to look hard: investment, skills, innovation
and best practice. Now, in investment what has definitely got
better in recent years is that in the past an uncertain macro
economic climate has deterred investment and the much greater
stability we have had in recent years has improved the investment
climate tremendously, but we still have problems with the culture
of short-termism. Since we produced that report there has been
the massive growth of private finance which often leads to even
greater pressures for short-termism, and there are continuing
problems with a lack of understanding between industry and finance,
so that would be one issue. On skills, I do not need to lecture
a Committee that has Lord Moser as one of its members, but we
came to the unsurprising conclusion that Britain has a big problem
with high levels of people lacking in basic skills and high levels
of people whose skills are no higher than level two. There is
a second order problem with a shortage of management skills as
well, but that is less significant than the problem of basic skills
and skills above level two. On innovation, the situation has improved
to some extent and certainly the picture varies a great deal from
sector to sector. We have some world-beating industries in this
country which are very good at managing innovation. Overall, however,
we are still laggards when it comes to utilising new technology,
and that is a problem not just in product but also in process
innovation, so we are not just slow in making new things; we are
slow in picking up new ways of making them. On best practice,
again there are very high quality companies. I meet managers from
those companies and I have the greatest respect for them, but
unfortunately they are not typical of industry overall and there
are too many examples of companies that do not follow best practice
in management. I am not just engaging in a union whinge about
human resources management standards but it can be as diverse
as supply chain management, marketing—a whole range of important
skills that are not widely enough spread across British companies.
So that would be where we see the problems as resting.
Q116 Lord Wade of Chorlton:
But you have not mentioned the role of labour law in that aspect,
so you do not think it is an issue?
Mr Exell: If you look at the international surveys
that have been done, the work that has been done for the OECD,
some of the research that Stephen Nickell has done, they have
come to the conclusion that the strictness or otherwise of employment
protection legislation has very little impact on levels of employment
or productivity.
Q117 Lord Wade of Chorlton:
That is interesting. I agree with you entirely, investment is
one of the most important things and it is really having a system
that encourages that. We heard last week about the concerns of
the small business sector, that you can have a very small company
that can be very highly influenced by changes in labour law if
it applies to them, and that has a big impact on their ability
to raise money and to invest, and that is a very important part
of our economy as a whole. What are your views on that?
Ms Reed: We share some of the government's own
views that any regulation introduced in the area of labour law
should be good and should not introduce excessive red tape, but
our experience is that most employment laws, particularly those
introduced in recent years, are about setting a framework of minimum
standards of fairness and fair treatment in the work place, which
brings benefits not only to employees in small and large businesses,
but also to employers in small business as well as in large. For
example, issues relating to flexibility, the need for small businesses
to be able to recruit members of staff and the growing recognition
within that sector that to be able to attract women to work in
businesses, whether small or large, you often need to be able
to offer more flexible working patterns in order to accommodate
working life alongside childcare needs. We are not convinced that
there is any real evidence at present that the current levels
of employment law within the UK do impact on the ability of small
businesses to compete or be successful. We believe probably that
there are other factors which are of greater significance. Most
employers within small businesses I believe would want to say
they would want to be good employers and not have a reputation
of undercutting terms and conditions of employment not offering
fair treatment.
Q118 Lord Wade of Chorlton:
The evidence last week was that 44% of their members have said
that they would not employ an extra person because of the labour
law requirement, and these were people with about five employees.
Ms Reed: We have heard those statistics repeated
regularly whenever new employment rights are introduced. For example,
with the national minimum wage it was predicted that would result
in three million jobs being lost. But the actual evidence in terms
of employment growth in the UK does not support those arguments.
Particularly between 1997 and 2005 we saw substantial employment
growth right across the economy. We do hear those arguments regularly
but our view is that the evidence does not necessarily support
the points being made.
Q119 Earl of Dundee:
What do you think about the Commission's description of the evolution
of EU labour markets in recent times?
Mr Exell: Certainly we have some concerns about
what we might almost call a teleological assumption in the Green
Paper, the view that we are headed towards the destination of
greater labour market flexibility as the only route towards greater
competitiveness and jobs growth, and indeed one of the interesting
points if you look at the international comparisons is that Britain
presents the opposite lesson from the one that is often drawn
from our experience. At the TUC we get an awful lot of foreign
journalists and political delegations who come over to learn what
Britain is getting right, and then right at the end of their trip,
before they get the plane back to where they come from, they say:
"We had better speak to someone who disagrees with all of
this, we will go to the TUC"!
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