Examination of Witnesses (Questions 160
- 173)
THURSDAY 3 MAY 2007
JIM FITZPATRICK
AND MISS
JANE WHEWELL
Q160 Earl of Dundee:
How far then do you agree perhaps with the TUC when they say that
flexicurity does not necessarily make Europe more competitive?
Jim Fitzpatrick: I think that is a judgment
call. Flexibility within the labour market is important. We need
to upskill our workforce, we need to have training arrangements,
and, sadly, some businesses are relocating, there are redundancies
every year. I think the current UK rate of redundancy is about
two per cent. In 1997 it was about three per cent. We have six
million people changing jobs in the UK every year, moving to different
occupations. Most, not forced, most because people want to change
their job, there are opportunities for advancement, there is promotion—a
whole manner of things. There needs to be flexibility within the
labour market, but, equally, there need to be protections for
people so that wherever they are working there are going to be
minimum standards in terms of wages, in terms of conditions, in
terms of health and safety, in terms of maternity provision, time
off and the rest of it. So I think getting the balance right is
where we are at, and I think we are doing quite well. I recognise
the TUC may think that we are going too far in one direction.
Were that to be the case and were we to move, the CBI would be
straight on our case, saying, "You have gone too far in the
other direction." So, I think it is about keeping business
and keeping both social partners happy.
Q161 Earl of Dundee:
But if you believe that we, more or less, have the balance right
as things are, what kind of further measures would you still like
to see to get that balance even better?
Jim Fitzpatrick: I think that is very much a
matter of looking at evidence that is emerging. The labour market
is changing continuously. We are looking very closely at the moment,
just as an example, in terms of how agency and vulnerable workers
are treated within the UK. There have been a lot of debates, particularly
in the past week after the BBC broadcast last week on Lithuanian
migrant workers being taken advantage of up in Hull, and we are
looking very closely at that in terms of our enforcement regimes.
We are always looking at the labour market, we have a programme
of issues that are continuously coming up, and business and the
unions are always beating a path to our door saying, "You
could do better here", or, "You could do better there",
and we are always obliged to examine suggestions that come forward,
particularly when they come forward on a joint basis between business
and unions: because if there is a joint acceptance and acknowledgement
that we need to adapt, amend, withdraw or change regulations,
then we would be obliged to do that. The world is a fast-moving
place these days, and that is no less true in the labour market
and in labour law than in any other aspect of society.
Chairman: I think we have made a natural
move towards Lady Gale's question.
Q162 Baroness Gale:
The Green Paper describes the increased diversity of workers in
the labour market across the EU as "insiders" with a
high degree of job security and "outsiders" who are
much more insecure in the workplace. They are suggesting that
if we had a modernisation of labour law, that could address that
issue. What is your view of the need for labour law reform in
addressing these disadvantages of the people who are in this insecure
position in the workforce, and to what extent do you think that
other policy actions, for example enabling a high employment rate
and encouraging education and skills development, would be much
more effective?
Jim Fitzpatrick: I have mentioned earlier that
we look at skills and upskilling education and training as being
absolutely fundamental within the UK economy, and I think that
is equally true within the European economy. We have 900,000 people
claiming benefits, maybe one and a half million roughly unemployed
within the UK. Within Europe the figures were 18 million people
unemployed. I was with Secretary of State Hutton at an Informal
Employment and Social Council in Berlin about two months ago,
and the evidence that he gave was very much along the lines that
we do run the risk, if we do not look after the 18 million unemployed,
of creating or entrenching the emerging differences between those
in work and those out of work. Now, as you describe, Baroness,
there is a third strand emerging. There are those in work who
are absolutely secure, there are those in work who are maybe not
quite so secure but they are on the fringe and those out of work
who will be possibly completely lost. I think labour law has a
part to play, but I think the education, training and upskilling
of the workforce within Europe will have a much more measured
part to play to make sure that we can continue to compete within
the world economy.
Q163 Baroness Gale:
Labour law on its own, as far as I see it, and as you see it from
what you have said, would not on its own secure these insecure
workers then. What I cannot get round is we have a lot of workers
in our country who are not skilled and they do lots of jobs that
need to be done. Does the idea that we would upskill everybody
leave us perhaps with a problem? You have a skilled work force,
which is what we would all be aiming for, there are still a lot
of people who can do unskilled jobs as well, so what would happen
to the economy? "I have got the skills. I want to go on working.
I want a better job"
Jim Fitzpatrick: I think the numbers that we
have at the moment without any qualifications, I think I am right
in saying, is about five million, and I think the projections
are that, within 20 years or so, the numbers of jobs that will
be available for people without skills will be reduced hugely
down to a million or less, which is why the drive for education
and training is so important. Labour law and the framework of
labour law clearly has a place and a role to play, but if we do
not upskill our people, if we do not impress upon people the importance
of getting educational qualifications and the ability to demonstrate
and maximise their talents and maximise their potential, then
we can pass whatever laws we want on legislation and labour law.
If people are not able to do the jobs that are available and if
we are not able to nurture our entrepreneurial skills, because
the Chancellor has been working very hard, the Treasury has been
working very hard to encourage more entrepreneurialism within
the UK, and we have improved a lot, but we can improve so much
more, and if people have the skill, have the education, they will
be able to spot opportunities within the global labour market
to be able to take advantage of those; and if they start their
own companies and we can help them do that, labour law will then
come into place in terms of saying: "If you are now a new
employer, we have got some minimum standards that we would want
you to observe", and they are bare minimums—the national
minimum wage and paid holidays and the rest of it. Most decent
companies, obviously, are paying far more than those. So, I think
there is a part and a role to play, but I think education, training
and upskilling is equally, if not more, important.
Chairman: Thank you for that. Lady Uddin.
Q164 Baroness Uddin:
Good morning, Minister. I suppose you have led to my question
very appropriately, but before I ask my question I just want to
ask a supplementary to Baroness Gale. If what you say is right
(and I know, of course, you are someone well informed), if you
say that there are such difficulties, just dealing with the upskilling,
or that upskilling is more important, if you like, or should be
a partner also to ensuring enforcement of labour law, given the
very significant Europe migration (and since the accession there
has been much more flexibility about incoming migration), is not
enforcement much more difficult, even to encourage entrepreneurship,
when people are much more willing to undercut the current minimum
standards that we apply in Britain? Do you feel that there is
a sufficient amount of enforcement available to the UK to ensure
that enforcement is available to the bare minimum standard? I
have another question, but I would very much like to hear from
you.
Jim Fitzpatrick: The BBC expose[acute] last
week was, obviously, very disturbing, because we have spent ten
years putting minimum standards and protections in place and to
see these rogues taking advantage of people from Lithuania was
very disturbing and distressing. We have got all the agencies
looking at the evidence at the moment and identifying what went
wrong in that particular instance and whether we need to do anything
to address it. We also, however, have identified ways of trying
to protect people. We have produced leaflets (which Jane is putting
in front of me at the moment) in Lithuanian, in Polish, in Portuguese
which we send to trade missions and employment centres in those
countries, we take adverts out in papers, we circulate these leaflets
in these languages to the communities within the United Kingdom
and the people from the new accession states who are applying
for work permits, we supply literature in the Home Office pack
that they get so that we can say to them: "When you come
to the UK, these are the bare minimums." One of the things
that people are told before they come to the UK is that they can
borrow money, because in the UK they get £5.35 an hour, but
what they are not told is when they get to the UK the cost of
living is a lot higher than in their own country. So, they are
misled in many ways. We are trying to break down that misinformation,
so that if people do want to come here, if they can come and be
productive, which is what we want because we have got lots of
jobs that, sadly, people do not want to do but in some of the
migrant countries people do want to do and are happy to do and
they are doing a great job for us, then we need to make sure that
they are protected. The BBC programme demonstrated that there
was a rogue operating in that arena. We know that there are people
who will always take advantage of workers, whether they are indigenous
UK workers or workers in EU states or even further afield. We
need to look at the various enforcement agencies. We have got
the Police Trafficking Team, we have got the Employment Agency
Standards Inspectorate, we have got the National Minimum Wage
Enforcement Teams, we have got the Gang Masters Licensing Authority,
as well as others. Those are the four main protector agencies
who all have legal powers to protect people and to prosecute where
there have been breaches of legislation and protection. We need
to look at the Lithuanian experience to see if there are any lessons
to be learnt from that in terms of being more joined up or whatever.
We have also got a Vulnerable Workers Consultation running at
the DTI at the moment, which concludes on 31 May, where we have
identified four or five areas where we know there are breaches
going on, loop holes that we can close down very simply by regulation.
We are starting two vulnerable worker pilots in spring this year.
We are launching them, we hope, in late May, one in Birmingham
to look at the hospitality sector, one in East London to look
at the cleaning and security sector at Canary Wharf and in the
City, on which we are spending almost a million pounds to gather
evidence to say, "Okay, we will put all these protections
in place. What is actually happening out there?" Because
we are getting a lot of anecdotal evidence about wage levels being
undercut, about people being taken advantage of, but we cannot
draft legislation on anecdotal evidence, so we are going out into
the field to gather hard evidence to see what we need to do and,
in that instance, we think we have got a lot of it right but we
are not thinking for a second it is perfect, and we know that
we have got some tidying up and some closing of loopholes to do
and, if further evidence emerges that people are being abused
in different ways, we ought to be able to deal with that.
Q165 Baroness Uddin:
You have pre-empted one of my questions, which is how are you
going to inform those who may be vulnerable as a result of others
taking advantage? I will come to my final point. Do you think
that there may be advantages of uniformity of EU labour laws,
European-wide labour laws?
Miss Whewell: Thank you Baroness. In response
to your question, it is quite illuminating. Again, in the BBC
case one of the issues that came up continually was that the worker
had paid money for a job that did not exist. I was in Lithuania
earlier this year and found it is currently legal in Lithuania
to charge these fees; it is not legal in the UK. I have been in
quite detailed discussions with my opposite numbers, giving them
access to the evidence we have got and the experience we have
had pointing out that there are certain areas of legislation where
it does actually set people up for difficulty, and we will be
working with Lithuania to try and warn people: "People say
the streets are paved with gold; they never are. Think twice before
taking a loan, because that can get you into deep trouble."
I know my colleagues in Lithuania are planning to introduce legislation
to govern a whole range of aspects here, but we do need to talk
to each other because there will be always be people quite determined
to mistreat workers. They will lie; they will say things that
are just completely not true. Therefore, the important thing is
to get information to workers before they even leave, because
by the time they reach the UK, having been lied to, in debt, no
English, perhaps no skills, no job, no home, it is terribly difficult
to help them; so we need to make sure they ask all the right questions
before they even leave their own country.
Q166 Baroness Uddin:
I think this group of people are still particularly vulnerable
to not receiving the minimum wage. My experience and my understanding
and knowledge suggests that, not only amongst migrants but also
the vulnerable population within our country. I think we need
to do much more about making people aware that it is totally unacceptable
but, more importantly, it is illegal to be paid for a job that
does not reach the standard of minimum pay?
Jim Fitzpatrick: I think that is a fair comment,
and that is why the Chancellor in the Pre-Budget Statement last
year announced that we will be increasing the resourcing of the
National Minimum Wage Enforcement Teams by 50 per cent, which
he confirmed in the Budget, because there was concern out there
that there are people who are being exposed and we need to make
sure that the minimum wage is paid and, where it is not paid,
we can take those companies and businesses to task. We are about
to consult on new penalties. We increased the penalties back in
January, but we want to look at a regime where we can get better
clawback. We got three million pounds back-pay from companies
last year for people who were deprived the minimum wage, but now
that we are focusing down (and we do believe we are focusing down)
on the hard core of people who seem to be trying it on and getting
away with it all the time—this is not about ignorance or
lack of awareness—our feeling is that we have to beef up
the penalties and we have to increase the enforcement teams, because
we can crack it. There will always be some people who will take
advantage, but if we can get a culture within the UK in force
at the moment, then we think that will help everybody.
Q167 Lord Wade of Chorlton:
Would you not agree that there are rogues in all walks of life
and it is important to deal with the rogues and not impose regulations
on everybody, the vast majority of whom are honest, decent people?
Jim Fitzpatrick: Absolutely, and that is why
we are operating on a risk assessment basis, but we are not looking
to take to task good companies that we know are doing the right
thing. We want to focus in on those who are not playing by the
rules: because they are not only cheating vulnerable workers but
they are under-cutting decent companies and preventing them from
operating at a better profit level because they are doing the
right thing. This is a business protection measure as well as
protecting vulnerable people.
Q168 Lord Trefgarne:
Minister, we have heard concerns expressed that the British Government
is rather prone to gold-plate EU regulations when they emerge,
and we have heard examples of, for example, extension of the provisions
of part-time workers to casual staff, the additional to the Age
Discrimination Directive of a procedure for employers "duty
to consider" the retention of staff—it went a bit further
than the Directive—after the age of 65. You have already
touched on the increase in the minimum annual holiday required,
which is 20 days in the Directive and now 28 days as far as we
are concerned, and you have just talked about that as we were
discussing even more bank holidays. Why do we need to gold-plate
the regulations if, as you have said previously, many British
firms go further anyway?
Jim Fitzpatrick: I think this is probably the
first point of clear disagreement with a statement this morning.
We do not accept that we are gold-plating, and I think the easiest
example is the eight days public holiday. We do not believe that
is gold-plating. We believe that this is a minimum standard to
which everybody in the UK should be entitled. We do try to measure
and try to make sure when we introduce European measures that
they are appropriately balanced. We do not think that we are gold-plating.
We think that the CBI, in general terms, is supportive of the
way that we have introduced legislation.
Q169 Lord Trefgarne:
That may be so, but it is still going further than the Directive
requires?
Jim Fitzpatrick: The "duty to consider"---.
In terms of introducing anti-age discrimination legislation, we
could have passed the legislation and said nothing and done nothing.
To actually say to a manager or a business owner, if somebody
is approaching 65 and they want to work beyond 65, "We think
you have got a duty to consider it" and "We think that
is fair play". They are not obliged to keep the person on,
they do not even have to give a reason, but we think there is
a duty to consider, and we thought that that was the appropriate
thing the do. It does not require any additional regulatory burden,
in our view, because any decent employer, when an employee came
to them and said, "I do not want to go. Can I stay on for
another six months, another 12 months?", would say, "Okay,
let me think about it. I will come back to you." They are
considering it and, therefore, they are playing fair by their
employee.
Q170 Lord Trefgarne:
I am not necessarily disagreeing with the merits of what you have
proposed, but the fact is that what you have brought into law
is further than the directives require, and that is the criticism
that has been raised?
Jim Fitzpatrick: In that case, we would not
dispute that assertion, but the general position, I believe, of
the CBI, for example, is that they accept that the way that we
do it is appropriate and, therefore, there is no major dispute
about the way that we implement the regulations within the UK.
Miss Whewell: Perhaps I should declare an interest
as an official in this context, but I think there is a tension
particularly inherent in European law where it tends to be drafted
in a very broad brush manner, there is a lack of detail and we
are caught in the middle. It is perfectly possible for us to copy
out the Directive and say, "That is the law", and say
to industry, "Now get on with it." I do not think they
would be terribly happy, because, just as much as they are saying,
"Please do not gold-plate", and we try very hard not
to, they also ask us for the maximum flexibility possible under
the directives. They ask us, above all, for clarity. Clarity is
not a predominant feature of a lot of European law, so we do our
best to make the law as clear as possible for business. Sometimes
people feel that is gold-plating; one could debate that for a
very long time; but we do our best and there is a programme now
looking at large parts of UK legislation, both domestic implementation
of European law and UK law about, "Can we simplify it? Can
we make it easier? How can we help business?"
Q171 Lord Trefgarne:
You have talked about the CBI. It tends to be the small business
organisations who complain about gold-plating more than the others,
because the larger firms tend to adopt these standards anyway.
Jim Fitzpatrick: And we do recognise that many
small firms do not have HR departments, they do not have the legal
back-up that large firms do, which is why we are working very
hard with our on-line guidance, with the tools that we are providing
through Business Link, with the assistance that we are giving
and working hard on the simplification programme and trying to
identify those areas where it could be more pressure on small
companies and to make life as easy for them as possible.
Chairman: Thank you for that. We are
running short of your time. If you could just deal with Lady Morgan's
question and then, if you do have some comments on the consultation
process which the Commission goes through, is it satisfactory,
et cetera, which is our last question, maybe you can put it on
a sheet of paper, or get someone to do that for you, but I am
concerned that we really are at the end of our time.
Q172 Baroness Morgan of Huyton:
The Working Time Directive: where do you think this is going?
Clearly the UK has had a pretty clear view on it. You have taken
a position that it is not a health and safety issue as such, particularly
in relation to doctors and judgments. Where do we think this is
going?
Jim Fitzpatrick: To be perfectly frank, I am
not sure. It has been around for so long. We worked very hard
during the UK Presidency and got close to an agreement; the Austrians
also did; as did the Finns in their Presidency in 2006; the Germans
said they were not going to go near it because so much effort
had been expended; the Portuguese are saying maybe; but, again,
there has been so much time and effort put into trying to arrive
at an agreement. When countries have a very limited six-month
period of presidency and want to achieve objectives, why pick
up working time when it has clearly failed over recent years,
notwithstanding the great effort that has been put in? It is,
in my limited view, in my limited experience in Europe, like Banquo's
ghost: whenever you talk about anything else, working time is
sitting over in the corner, then comes centre stage the minute
you start making progress. People have such entrenched views now
that there is almost a "them-and-us" mentality and trying
to break that down when talking about other aspects of policy
is very difficult. I think that is why it is so important we do
try and arrive at an agreement. SIMAP/Jaeger and the rulings by
the European Court made life even more difficult, it gave an imperative,
and some countries were saying, "Maybe we could split the
dossier for certain sectors." We would be supportive of that.
We have not led on it because we are said to be leading the outside
camp and, therefore, if we had been seen to be leading splitting
the dossier, then people would have said , "If they are for
it, we have got to be against it because there is something in
it." We are very proud of the arrangements we have for working
time in the UK because we have got total transparency. We count
the hours we are paying individual workers, we give people the
opportunity to opt out if they think it is appropriate for them,
notwithstanding in certain occupations there are protections under
health and safety legislation. Other countries are operating different
conditions for two contracts for two jobs. Many countries have
got bigger informal economies than we have and, therefore, people
are under the radar. We can demonstrate, we believe, that the
Working Time Directive is correctly applied in the UK (1) because
we have one of probably the second best health and safety records
in the Union, and that was one of the biggest arguments put up
about working time—we say, "We are open to scrutiny
on health and safety. You can come and check the books"—and
(2) in terms of the operation of the economy. Two and a half million
extra jobs in the past ten years—it has not prevented that—and
only 11 per cent of our work force exercise the opt-out. The vast
majority of our people are happy, and companies are happy, and
the average hours worked for UK workers since 1997 has come down
from 33 hours to 32 hours. So, we are working less in the UK,
notwithstanding we do use the opt-out. We will fiercely defend
the opt-out, and our European partners know that. We are interested
in trying to arrive at an arrangement for SIMAP/Jaeger, but whether
the Portuguese Presidency is prepared to pick that up, I am not
entirely sure. I think they are seeing that so many of us have
had our fingers burned it may be too early, but SIMAP/Jaeger was
producing a driver and a lot of commonsense to say: "This
is just not working. We have got to fix it for all Member States",
because the costs to health services, social services, security
and fire services across the EU was considerable.
Q173 Chairman:
Thank you, Minister, you have been very forthcoming and frank
with us. We have enjoyed your session. We must release you now.
Jim Fitzpatrick: To the chamber for DTI questions.
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