Examination of Witnesses (Questions 143
- 159)
THURSDAY 3 MAY 2007
JIM FITZPATRICK
AND MISS
JANE WHEWELL
Q143 Chairman:
Good morning, Minister, and welcome to our Committee, and also
to Miss Whewell.
Q144 Chairman:
We are grateful to you for making the time to speak to us. I know
you have got a busy schedule this morning and somebody is going
to drag you away at the appropriate moment so that you can do
your duty at Questions at 10.30. Thank you also for your written
evidence, which we have in front of us. Employment issues, of
course, are of great interest to this Committee and, you will
remember, we did a report on the Working Time Directive a little
while ago and so we are welcoming this Labour Law Green Paper
as a way of coming once again to these issues. We have Professor
Philpott, who I am sure you know, who is our specialist adviser
for this inquiry. I am sure you have done this before and you
know all the points I am going to make, but before we start I
need to make a few housekeeping points. We have scheduled an hour
for the session until 10.30. It is open to the public and it will
be recorded for possible broadcasting or webcasting. A verbatim
transcript will be taken and will be sent to you for your correction,
if you could correct it as soon as possible. It will eventually
be put into the public record in printed form and on a Parliamentary
website. If you wish to submit supplementary evidence after the
session to clarify or amplify any points made during your evidence
or to answer questions which are not reached or fully treated
today, that is most welcome. Quite a number of our witnesses find
that a useful exercise from their point of view as well. It would
be helpful if you could try to speak clearly so that the record
that is made is as accurate as possible. Perhaps you could start
by giving us, for the record, your names and your positions.
Jim Fitzpatrick: Good morning. Thank you very
much for the invitation. Jim Fitzpatrick, Parliamentary Secretary
at the Department of Trade and Industry with responsibility for
employment relations, postal services and Minister for London.
Miss Whewell: I am Jane Whewell, and I am a
director in the Employment Relations Directorate for the Department
of Trade and Industry.
Q145 Chairman:
Would you like to make an opening statement, Mr Fitzpatrick?
Jim Fitzpatrick: No, I think we have declined
to do that, with greatest of respect, in order to make sure we
can try and cover the questions that you have down; and that would
suspect that anything that we would want to say will probably
be included in our responses.
Q146 Chairman:
Excellent; thank you. Obviously labour law in the Member States
is a mixture of domestic and EU-wide legislation and that mixture
varies from Member State to Member State, and, in some countries,
measures implemented not by legislation but through collective
bargaining also play an important role. It will be valuable to
have your view on the impact of labour law on the global competitiveness
and productivity of UK business. What is your view of the extent
to which global competitiveness and productivity has been helped
or held back by the labour law that already exists in this country?
Has the major part of that impact, if it is there at all, arisen
from EU legislation or from domestic legislation?
Jim Fitzpatrick: I am not sure how easy it is
to quantify the impacts of labour law on productivity. I think
what we can say over the past decade is that the UK economy has
performed exceptionally well. Clearly, on record, we have increased
our work force by two and a half million people since 1997 and
we are graded highly by the World Bank as a good place to do business.
We have introduced new rights and responsibilities on employers,
rights for employees. We feel that we have got the balance about
right. We clearly identify that there is a skills deficit, hence
the Government's ambition to get 50 per cent of young people to
university or further higher education. The Leitch Review and
initiatives like Train to Gain identify a way forward in terms
of upskilling. The impacts of labour law are difficult to quantify.
We would, I guess, suspect it would be less than people may imagine.
Q147 Chairman:
Thank you. You have answered the second question in a way, because
you have said that improving performance falls on investment and
skills formation. Is that the way to tackle productivity, do you
think, rather than a more rigid and rather differential attitude
towards labour law? Also, what do you say in relation to the point
made by one of our previous witnesses that the UK's relatively
lower productivity record partly arises because a larger proportion
of people here are able to find employment than in many other
EU states; in other words full employment has not assisted with
productivity?
Jim Fitzpatrick: Full employment may assist
with productivity, in their view, but it makes for a happier country,
given that people have a better opportunity to have a decent quality
of life. I think we are moving up the productivity league table.
I think the gap between us and France and Germany has narrowed
quite considerably in the last decade. We are now on a footing
with the likes of Canada, Italy and others, and we feel that there
has been an improvement in the productivity arena. Certainly a
number of the new rights that we have introduced, like the right
to request flexible working, seem to be producing evidence from
companies which says that people are happier at work in those
environments where they feel valued and that productivity goes
up, absenteeism goes down, morale is higher and, therefore, the
companies that have gone down the road of trying to create a work-life
balance for their staff seem to be benefiting from that. So, I
think, in general terms in respect of productivity, we are clearly
improving our international position and domestically, in terms
of whether people are producing more at work, I think the evidence,
which, as I say, is starting to emerge, indicates that the balance
which we are trying to introduce in terms of assisting people
to get the right work-life balance for themselves and their families
is having an impact on productivity and helping people as well
as companies.
Q148 Lord Wade of Chorlton:
May I ask a supplementary to your first answer to the first question.
You commented on the fact that we have got increased employment
in this country and that globalisation is not going to affect
us, but surely you would agree that we are becoming more and more
dependent on imported manufacturing goods. We have transferred
a lot of our manufacturing employment abroad, and the increase
in employment in this country has really been service and social
benefit jobs and all these other things in society rather than
actual wealth creating jobs. Would you agree with that?
Jim Fitzpatrick: I am not convinced that we
have replaced the traditional manufacturing jobs from the industrial
sector with non wealth-creating jobs. I think we are creating
wealth in different ways in the UK. It is clear that we cannot
compete with the wages levels that are being offered in China,
India and emerging nations. Where we are still ahead is as the
knowledge economy, in the service sector, tourism is growing,
and in other industries which are bringing in good revenue, but
if we are not careful we are not going to stay ahead in those
areas given the millions of graduates which are being turned out
from the universities in India, China and in other emerging countries.
So, if we do not upskill, if we do not encourage more young people
to go to university, the fear, naturally, would be that we would
be overtaken in the knowledge economy. Just as we have been overtaken
in the manufacturing arena on cost, we will be overtaken on knowledge
because of the better opportunities that young people have in
emerging nations. So, I agree that we have changed where we are
getting our wealth from, but I am not persuaded that, because
it is coming from non-traditional industries, it is not welcome
and it is not performing well for the UK Plc.
Q149 Lord Trefgarne:
May I ask a quick supplementary? You referred to the modest improvement
we have had in productivity in recent times, and that is fair
enough. How far has that been the result of increased investment,
rather than the sort of things we are talking about now, and maybe
even more investment would improve the picture further?
Jim Fitzpatrick: I think that that is a very
fair comment, your Lordship. One of my areas that I mentioned
at the start is being Minister for Postal Services, and in Royal
Mail Group it is absolutely clear that Royal Mail is very vulnerable
to the competition. We now have a liberalised market, because
lots of the companies which are moving into mail delivery are
very automated, very mechanised, which is why we are spending
hundreds of millions of pounds to assist the company in its modernisation
and transformation programme, because if they do not introduce
new technology, if they do not introduce automation, they are
not going to be able to compete against the other companies in
the field; and that means investment- it means investment in technology,
it means investment in equipment—and that costs jobs. There
will be jobs lost, and there have been tens of thousands of jobs
lost from Royal Mail already in this arena. So, investment is
a big part of making sure that the UK remains competitive.
Q150 Lord Wade of Chorlton:
Minister, I would like to discuss a couple of issues with you
in relation to the impact of labour law on UK business. As you
will be aware, we have had evidence from the CBI and from the
Federation of Small Businesses, and both are concerned about the
impact of labour law upon businesses and on their wealth creation.
I wonder to what extent you have any sympathy with the views of
the CBI and the FSB argument that, regardless of the merits of
individual pieces of legislation, the cumulative effect is becoming
quite serious in some companies in some sectors?
Jim Fitzpatrick: We always take very seriously
any submission from the CBI, as we do from the TUC. However, I
think that, notwithstanding that business will always complain
about the burden of regulation, the evidence suggests that we
are getting the balance about right, otherwise the UK economy
would not be performing as it has been over the last decade. Surveys
undertaken for small businesses right the way through say that
regulation is a very tiny restriction on their ability to expand
and to grow, and from our point of view the fact that we are introducing
minimum standards across the UK labour market, such as four weeks
paid holiday, the regulations that we are consulting on at the
moment to give eight additional days for bank holidays to everyone
in the UK, some people have criticised as being burdensome, just
as some criticised the introduction of the national minimum wage.
We do not think they are burdensome, and we do not think they
are burdensome on the vast majority of companies, because the
majority of companies in the UK observe far better than minimum
standards. There will be always be concern about regulation, and
we have got, as I am sure you know, the Government's simplification
plans which were published only a few months ago. We are regarded
as being one of the best places to do business by the World Bank.
We took the Dutch lead in terms of trying to reduce the regulatory
burden. The DTI, because of the fact that we are the business-facing
government department, has more regulation to deal with than anybody
else in terms of making life easier for business, and we have
already identified £700 million worth of savings in regulation.
We have introduced simple mechanisms. Regulations are now only
introduced on 1 April and 1 October. So there are two implementation
dates in the course of the calendar, which means business knows
and can plan forward, but we have also got a number of other initiatives.
We have a practitioner panel, which includes representatives from
business, and from the TUC, which meets regularly to advise us;
I myself Chair a Ministerial Challenge Panel on a bi-monthly basis—I
think it is bi-monthly; it sometimes seems more frequent—but
this is a clearing house for business representatives from small
business, from the Chamber of Commerce through to the CBI to ask
us to bring officials from any government department to actually
explain regulation and to defend regulation, and we make recommendations
as to where we can go, and we also have the Business Link website,
which has an open invitation to small businesses in particular
to demonstrate where they think there is a problem that we need
to look at to try and make life easier for business. We have got
on-line tools and guidance now to make life much easier for small
businesses because they can download templates, to tick-box and
fill in forms as opposed to having previously to deal with and
list regulations themselves. So, we think we are working very
hard to make the regulatory burden as light as possible, but we
know that this is an ongoing and continuous task. We know that
business will always complain that they are over-regulated, and
sometimes they are right.
Q151 Lord Wade of Chorlton:
We had views from the FSB that small businesses might be in someway
exempted from some aspects of employment regulations. In asking
this question I must declare an interest because I am involved
with a number of small businesses, particularly in venture capital
activities where I have spent a lot of time starting businesses
and I know the enormous pressure that, in fact, they are under
in practice. I must make the point that running a small business
is a very, very lonely business and you have got to concentrate
all your efforts on what you can do to make the business survive,
and you know better than I how many businesses do not survive.
I think this is an issue and, although I am pleased to hear that
you are looking at it very closely, I do hope you will continue
to do so because I think it is a very important issue. Do you
have a view on a possible de minimis system for small business?
Jim Fitzpatrick: There are some regulations,
for example the statutory trade union recognition procedure does
not cover companies with less than 20 employees. We thought that
was perhaps too burdensome when we introduced it, but when we
introduced the national minimum wage and paid holidays, maternity
leave extensions, et cetera, we felt that those were appropriate
to be extended to the whole of the workforce. We do give assistance
where we can to small businesses. I did mention a moment ago that
surveys undertaken indicate that, although there are some businesses
who do say that there are problems, a very small per centage actually
identify that the regulatory burden is what is preventing them
from expanding. Therefore, we think we have got the balance about
right.
Q152 Lord Trefgarne:
May I ask another quick supplementary, with your permission? I
think the Minister said he was consulting on allowing the eight
bank holidays as further compulsory holiday, if you like. I have
done a brief calculation, and I hope I have got it right. That
is four per cent on the wages costs of every firm. Is that what
you intend?
Jim Fitzpatrick: The evidence that we have at
the moment is that the vast majority of companies already give
at least 28 days. In the European league table of public holidays,
the UK sits either at, or very near, the bottom. The introduction
of time off for the eight bank holidays will take us to just below
mid table. So, in terms of European competitiveness, we do not
think that this ought to create a major problem. When we introduced
the four weeks paid holiday through the Working Time Regulations
back in 1998, I have to say, as a backbench MP at the time, our
expectation was that people would get the bank holidays on top
of the 20 days. What has emerged since then is that the vast majority
do, but there is a small minority who do not, and what we are
saying is that everybody ought to be able to expect time off for
eight bank holidays as well as four weeks paid holiday during
the course of the year's working time for a company. We made this
a manifesto commitment in 2005. We have been consulting almost
since then with business and with the trade unions. We are closing
in on our conclusions. We hope to introduce the first four days
from October this year and the second four days from October 2008.
We are just concluding our consideration of the submissions that
we have had from businesses saying that they would like a transitional
period, which we may be able to allow, but we are determined to
introduce this and we do not think the cost is going to be unnecessarily
high for business to match.
Q153 Lord Trefgarne:
There is talk of another bank holiday, I think, is there not?
Jim Fitzpatrick: There is always talk of another
bank holiday. I am the Minister for time. So, when we get the
clock changing every spring and every autumn, there is a flurry
of letters saying, "Why cannot we go to central European
time", or double summer time, or whatever. There was a Private
Members Bill from Mr Tim Yeo only recently. Again, looking back
at all the evidence, we had the experiment from 1968 to 1971 (three
years) when we had double summer time, and the Government changed
it because the country said, "We have had enough of that.
We want to go back to where we were before." The Portuguese
had a four-year experiment. They abandoned it; they came back
to GMT. There is almost a line you could draw in the country as
to who would benefit and who would not benefit and even there
it is not quite clear. There is a flurry of letters coming through
because in Northern Ireland they are introducing an extra bank
holiday. The Scottish Parliament has passed legislation to say
that St Andrews Day should be more closely celebrated. Forgive
me, this is classic cockney. I have been a Londoner for 35 years,
so in case this is causing any confusion, as Baroness Uddin knows,
my constituency is Poplar and Canning Town in Docklands in East
London, and because the Scottish Parliament has passed legislation
to say we should celebrate St Andrews Day more closely, people
have been saying, "The Northern Irish have got an extra bank
holiday, the Scots are having one, we want one and we want St
George's Day."
Q154 Lord Trefgarne:
Trafalgar Day, please!
Jim Fitzpatrick: We would, obviously, have some
sympathy with that, but what the Scots have said is that they
are not having an extra bank holiday, what they are saying is
people can reserve the right to work on one of the traditional
bank holidays and ask their employer if they can have St Andrew's
Day off instead, and they are trying to get some flexibility in
here. So, there is not an extra bank holiday in Scotland, and
the Government has no plans to introduce one at this point in
time. The eight days leave that we are introducing is to create
a level playing field for the good businesses who have traditionally
given people the leave that we all expected they were entitled
to and to say to the businesses, some quite big businesses, who
have not that they should play fair by their work force and give
the minimum that is required, and these are minimums. Some companies,
obviously, allow a lot more.
Chairman: I think we had better get back
to labour law and collective rights and Lord Moser's question.
Q155 Lord Moser:
I am rather sorry to leave that subject. Minister, you referred
to the TUC just now. The TUC, when they gave evidence to us, stressed
the importance of fundamental rights as part of labour law and,
in particular, the coverage of collective bargaining, et cetera.
It was an obvious topic. What do you feel about the TUC's view
that the EU approach to all this should cover collective rights
more than they do as well as individual rights? That is the issue.
Jim Fitzpatrick: I do not see the Green Paper
as an attack on collective bargaining or an attack on trade union
organisation. I probably should declare an interest. The last
ten of my 23 years as a member of the London Fire Brigade was
as a seconded lay official of the Fire Brigade Union on full-time
release doing trade union duties. So, I have a trade union background,
albeit in lay terms. We think that the collective arrangements
that we have in the UK are serving us well. Only six and a half
million of our 27, 28 million people in work in this country are
formally members of trade unions affiliated to the TUC, so it
is a minority position, and the TUC obviously used to be a much
bigger organisation and hopefully it will be able to take advantage
of that which we have introduced by way of better rights and statutory
recognition arrangements, which have been in position for some
years now, but we do not see the Green Paper as being an attack
on collective bargaining or on trade union rights and we would
be firmly protective and defensive of those because we see that
we have the balance right between the social partners in the UK.
Q156 Lord Moser:
Does the EU have the balance right? I suppose that was the implication
of the TUC question.
Jim Fitzpatrick: I think the difficulty in assessing
that is that there are so many different models. Almost every
country has a different model, and the Commission is trying to
put in place some basic standards and some guidance, but they
do not have competence to legislate in the area of industrial
relations. Things like the Working Time Directive and Agency Workers
Directive, et cetera, they can put down what ought to be applying
in the workplace, but it is up to individual Member States look
at that and apply it in the way that is appropriate for them and
introduce it through the consultative mechanisms that are existing
in those countries. I do have to say that sometimes it is a bit
confusing to me how all the different Member States have their
collective arrangement agreements when we are criticised sometimes
by trade union colleagues in this country for not introducing
different aspects of European law, but we can point to other European
Member States who use collective agreements which give derogations
to aspects of European labour law and we say ours are better,
ours are stronger, and that is a no-win situation because it is
a judgemental call as to whose provisions are superior.
Q157 Baroness Neuberger:
The Green Paper, as you know, has a kind of description of the
changes in the labour market and has all the different flexible
types of contract, short-term and whatever. Some people would
say that it may make it much easier for employers because it is
so flexible, but it makes job security much lower. In your evidence
to us you argue that we have the second lowest job insecurity
feeling, if you like, in Europe, and, of course, we have got very
high employment and very low unemployment. To what extent do you
think it is the framework for employment flexibility and security
in the UK that actually offers an approach for the EU that they
could adopt, or to what extent do you think that at the moment
we are fortunate because employment is so high and unemployment
so low? To what extent is it the way we do things, or to what
extent is it just the chance of the way the statistics fall?
Jim Fitzpatrick: I think it is probably a combination
of both. Forgive me, I am not quite clear how wary I should be
of making partisan political points, but the way the Government
has handled the economy over the past ten years has created the
economic framework within which business has been able to operate,
which is given as the fortunate position whereby we have put on
two and a half million extra jobs and, therefore, with the arrangements
that we have in organisations like the employment service with
Jobcentre Plus, the New Deal, which really attacked the long-term
unemployed and youth unemployment, I think that people now know
there is a framework of social protection and social assistance
out there that if they do lose their job, for whatever reason,
then there are provisions within society to be able to look after
them and to assist them to get into another job; and because we
have two and a half million new jobs, because unemployment is
down and it is no longer the spectre that it was in recent decades,
I think that gives people a greater sense of well being and a
greater sense of security. How we have arrived at that, obviously
the economists among you would be probably much better placed
than me to make an analysis of whether it was Bank of England
independence, whether it was a light touch labour market, whether
it was reducing regulation or whatever, but I think generally
circumstances have worked in our favour and obviously the Government
will want to take some credit for that.
Q158 Baroness Neuberger:
Sure, but as far as you are concerned, you would not say that
legislation was the key player in that?
Jim Fitzpatrick: I think it has an influence.
To say that it does not would be foolish. If we were to introduce
regulation which would strangle companies in red tape then companies
would leave. We can always read in the financial pages of different
transnational corporations who are based in the UK who are saying,
"We are going to move out"—the discussion we had
earlier on about manufacturing—sadly that has been the picture
for some decades. Companies will always have the opportunity to
relocate. We are seeing Barclays at the moment in discussion with
ADN and all of a sudden they might move, but they would maintain
a huge UK presence. Companies can move wherever, and if we did
get the regulatory burden or the tax burden wrong, then, clearly,
that would act as an incentive for companies to move out. The
fact that we are seeing location of companies to the UK and companies
comfortable to operate within the UK tends to suggest to me that
we have got the balance about right.
Q159 Earl of Dundee:
How do you think that the modernisation of labour law can best
advance a flexicurity agenda?
Jim Fitzpatrick: I have to say that the first
time I heard the word "flexicurity" I was visiting the
Greek Secretary of State for Employment in Athens—on a 22-hour
visit, I have to say this was not an opportunity to enjoy the
city—and he used flexicurity and that was new to me, as
I was relatively new to the post. But, clearly, the concept has
been created, as it were, because of the two imperatives on the
one hand business wants to see flexibility in the workforce, the
ability of workers to be upskilled and to be able to undertake
tasks that are required, and the unions and workers themselves
want security in employment so that they have got some comfort
in the jobs that they have, in the wage levels that they enjoy
and the conditions that would emerge; so to combine the two is
very much the driver, I think, for European labour law. Every
Member State, obviously, has different imperatives and different
challenges and will adapt and adopt European regulation in different
ways, although obviously the core essence is there. So, modernising
law and modernising European labour law is very important, in
my view, in terms of trying to make sure that, within the whole
of Europe, we have a framework that allows individual Member States
and the economies and businesses within those to be able to function
competitively in the global market place.
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