Select Committee on European Union Minutes of Evidence


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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