Examination of Witnesses (Questions 1-19)
Mr Pat McFadden and Mr Giles Smith
10 JULY 2008
Q1 Chairman: Welcome, Minister. Thank
you very much for joining us. As you know, this is an issue that
has taxed and interested this Committee over a considerable period
of time and where we have contributed hopefully to the debate
and, we hope, helpfully to the Government's discussions in relation
to all of this, so we are looking forward to being able to discuss
further where we have reached. We are really interested to hear
about progress on the Employment Council meeting, and, I must
say, that is where we are really keen to get to, but there are
a lot of matters of detail and we have people of quite considerable
experience in this field and, as always, it is the experience
in the field that we have to investigate, but today people are
really keen to follow through some of the issues, so we are glad
you are here. Can I just begin by asking you to outline what you
consider to be the UK's key negotiation successes in relation
to the agreements reached on 9 June. How was it possible to reach
agreement in Council on this occasion when it had not been possible
previously, and we are more than aware of the ramifications and
the difficulties and indeed some of the continued difficulties?
Mr McFadden: I think we secured a good
deal for the UK on 9 June, and the specific question you are asking
is: why could you reach an agreement on 9 June that you could
not reach in December when these two Directives were also under
discussion? There were a few changes, which I will use by way
of illustration to make the point about the difference between
what happened over those six months. On working time, if I start
with that, our objective was two-fold. One was to secure the future
of the UK opt-out and the other was to reach a resolution of what
we have come to know as the SiMAP and Jaegar judgments,
which are about rest time, on-call time and so on. There were
changes from December to June on those points. There had been
in the draft before us in December a reference to Member States
having to prove their specific need to use the opt-out. We were
opposed to that, we did not think Member States should have to
prove a specific need and that this should be an issue of choice
for the employee. That has now gone. In previous drafts, not actually
in December, but previous drafts of Working Time Amendment Directives
put to Council over the years, there had been a lot of language
around a phasing out of the opt-out or providing an end date for
the opt-out. We wanted to ensure that that was not the case with
any draft we agreed and it is not the case with the draft agreed
on 9 June. There was also an issue around short-term contracts.
The Directive has a ban on the use of the opt-out for the first
four weeks of a contract. We were keen to ensure flexibility for
people who would be on short-term contracts where that might create
a problem and might mean the opt-out was not available to them
at all, so written into the agreement on 9 June is that that ban
on the use of the opt-out in the first four weeks does not apply
for short-term contracts, defined as up to ten weeks with the
same employer over a 12-month period, so there were a few changes
on working time. On the Agency Workers Directive, there was probably
more change between December and June than on the Working Time
Directive. The principal change that took place between December
and June on that front was that here in the UK we were able to
bring together the TUC and the CBI to reach an agreement on the
main points of how that Directive would be applied in the UK,
and that was published in May, and then our task was to ensure
that the Directive that we agreed would allow us to implement
the agreement that had been reached between the TUC and the CBI
We were successful in doing that on 9 June, so that was a substantial
change compared to the draft that had been put before us in December
and a greater change than probably anything that happened on working
time, although we did secure our key objectives on working time.
I said we had two objectives on working time and we probably also
had two on the Agency Workers Directive, which was to ensure a
fair deal for the agency worker, but also to ensure flexibility
for employers, and I think we secured that too. Now, we never
particularly wanted these two Directives to be taken as a package,
we did not think that was necessarily the best way to make policy
and reach agreement, but most Member States wanted it and decided
that way. The package, as a whole, before us on 9 June was a much
better deal and easier to agree from the UK Government's point
of view than on 5 December.
Q2 Lord Wade of Chorlton: Does that
mean then, in practice, that somebody that disagreed with our
view at the earlier date changed their mind at that meeting and
did not disagree with you, so you got the consent of all the parties,
as it were?
Mr McFadden: Well, with 27 Member States,
people—
Q3 Lord Wade of Chorlton: No, I am
not saying that there is anything wrong with that, but obviously
I would be interested to know who changed their mind.
Mr McFadden: I am not sure I could name
a Member State which specifically changed its mind on these points.
For example, on the agency workers agreement reached here, our
discussions with the Slovenian Presidency, who were very helpful
throughout, I should say, and with the Commission were, "Look,
you have a Directive that has not been able to reach agreement
in Europe for a number of years. We've had specific problems with
it, we think it is too inflexible, but we have now reached a domestic
agreement which we would like to see reflected in the Directive
", so I am not sure that it was a case of A N Other Member
State changed its mind between December; I just think it was a
better package.
Chairman: Minister, maybe
I could put the question differently and take us into the next
set of questions because, I suppose, the real issue is: where
are we now? We may not actually have agreement across all Member
States, as we know, and people may not have changed their minds,
or am I right in thinking they may not have changed their minds,
but needed to get an agreement, and an agreement is now settled?
Maybe you could say something about that when we start talking
about the Parliament and the Second Reading and where we think
that will take us, and Lord Eames wants to take us into that,
but, if you could cover those other points, it would be useful.
Q4 Lord Eames: I want you to be a
bit of a prophet for us. We are wondering, what is the prospect
that you see on the European Parliament's Second Reading, as a
whole? Do you see the package, as an entity, going through? Do
you see it being splintered in any way and what are the obstacles
that you see that might prevent a Second Reading deal during the
French Presidency? Then, following on from that, if the package
agreed in Council is not accepted by the European Parliament,
could you tell us how you see the way forward?
Mr McFadden: Well, there are a few questions
there, so, if I do not cover all of them, I am sure you will take
me back to the right track.
Q5 Lord Eames: It is a package!
Mr McFadden: Let us start with the first
point which is that the agreement on 9 June is not the end of
the story, that is true. There is a very important European Parliament
process to take place now. The Member States in Council, between
December and June or in the run-up to December and then in the
six months in between, did treat them as a package of two Directives.
The European Parliament will not necessarily. They are free to
decide to take these issues one by one or together and they are
free to decide that in their own way. There is a very important
European Parliament process to begin. My understanding is that
that will begin formally probably in December[sic]. I have
made some initial contacts with MEPs to make clear what I said
in the answer to the first question, that this is a good deal
for the UK and that we hope that it will be approved by the European
Parliament, but we are very conscious that that is an important
part of the law-making process in Europe. I think your second
question was, "What if that doesn't happen?" If that
did not happen and the European Parliament were to substantially
change the agreement of the 9 June, there is then a process referred
to as `conciliation' between the Council and the European Parliament.
I am hesitant to be too much of a prophet, even though you have
asked me to. It is an important process and we will fully engage
with it, as they say, although "engage" is a term I
am not always fond of, but we will talk to the MEPs from around
the different Member States. I am sure the Commission and the
Presidency will also do that. The Commission have a very important
role to play in securing the agreement that the Council have reached,
as do the Presidency, so we will play our part and hopefully others
will also too.
Q6 Lord Eames: You are not too despondent
then?
Mr McFadden: No, I am not despondent.
I am clear that it is not the end of the process, what we did
on 9 June, by any means and that this is important, but I am not
despondent. I think we still have work to do and we will do that.
I am just reminded by someone that I said maybe that the European
Parliament process starts in December, but September is of course
what I should have said.
Q7 Chairman: Before I bring in Lord
Lea, could I just take us back to Lord Wade's point in that we
know that there are countries that have objected. Are we doing
anything there to actually talk to them and make contact or engage?
Mr McFadden: Yes, of course we always
try to talk to Member States. I would make a more general point
about my experience of this in the past year, and there are people
around this table with far longer experience in these issues than
that. A European Union of 27 Member States has a great variety
of labour markets and people take a very different view of things.
If you take probably the hottest issue for some Member States,
the individual opt-out on working time, we take the view, and
the Government is very clear in this view, that that is of value
to employees in the UK by giving them choice over their working
hours and increasing their earnings by allowing them to work more
than 48 hours a week, if they wish, and also of value to employers
because it gives them the flexibility and, therefore, it is of
benefit to the economy, as a whole. Some other Member States take
a very opposed view and they do not believe there should be an
opt-out at all. They believe that a 48-hour week should be a firm
maximum, and I am sure that there will be some MEPs who take that
view too. This is agreed by qualified majority voting, it is not
agreed by unanimity, and a number of Member States made clear
that they did not support the agreement, more on working time
than on agency work, but it is qualified majority voting that
it was approved by, so there is work to do in the European Parliament,
that is certainly the case.
Q8 Lord Lea of Crondall: I wonder
if, on this interesting point about the variety of labour markets,
the Minister would like to think aloud about how we picture this.
Is there not a paradox, and this is lurking behind the different
categories of disagreement in the European Parliament and with
Member State governments, that, although there are very different
labour markets, there is almost an inverse correlation between
that and the amount of migration which is a feature of our labour
market? The fact is that over the last 20 years, in one respect,
we have created one labour market and, in other respects, of course
there is a great variety of labour markets, and some of the tensions
now are that we are playing a game in one labour market where
people's mental position is that there is a great variety of labour
markets, but, in some aspects, migration in terms of people who
migrate is a very good example of where actually there is one
labour market.
Mr McFadden: I am not sure what you mean.
Q9 Lord Lea of Crondall: The labour
markets, I am saying, are not all that different.
Mr McFadden: We have freedom of movement
around the European Union, if that is what you mean, by virtue
of being Member States. We have some conditions with regard to
Romania and Bulgaria of course, but, generally speaking, there
is agreement on freedom of movement for labour. What I am saying,
for example, is that there is a great variety of traditions in
labour markets, and let me use a very specific example. One of
these Directives deals with the agency sector. We have something
like 16,000 agencies or so in the UK and there is one Member State
that has five, so they are obviously going to view regulation
of agency work through very different eyes, and there is nothing
wrong with that, than we would with 16,000 agencies, many of which
are small businesses, so that is simply an illustration of the
very different types of labour market we have. We could probably
go down a long track on this, and maybe that is not the best use
of our time. We believe that the flexibility in the UK labour
market is one of the reasons why we enjoy a higher rate of employment
than many other countries with roughly 75 per cent of the working-age
population being in employment, so that flexibility has helped
to inform our approach to these two Directives.
Q10 Baroness Neuberger: Minister,
you have partly answered, you are not a prophet and you cannot
quite necessarily see how it is going to go, but I suppose what
we would like to tease out from you, insofar as you can go there,
is how the Government will try to convince MEPs, both our own
and indeed throughout the Union, of the merits of the agreement
that was reached in Council, and also how do you expect the other
governments to act, both those who disagreed and indeed those
who agreed, in trying to persuade the MEPs?
Mr McFadden: Well, as I say, we will
talk to MEPs, not just our UK MEPs, although that is obviously
where we start, and we will try to secure the maximum support
for the position that has been agreed. One thing, I think, to
bear in mind for everyone here, and it goes back to what we have
just been talking about about the diversity of labour markets
across the EU, is that it took a long time to get this agreement
in Council. These two Directives, as this Committee knows better
than most people, have been in discussion for years.
Q11 Baroness Neuberger: Yes!
Mr McFadden: We were finally able to
reach agreement. Now, like all agreements among 27 Member States
with different traditions, outlooks and labour markets, for any
single Member State it is probably not perfect. We believe, from
a UK point of view, that it is a very good deal for the UK and
that there is sufficient flexibility in both of these Directives
for us to continue on the high-employment route that we have enjoyed
in recent years. It is for the European Parliament to take its
own view, but I think it is worth everyone in this bearing in
mind how long it took to get the agreement on 9 June and, therefore,
if we all start unpicking it and saying, "We don't like this
part and we don't like that part", we could be back where
we were, which was an inability to agree this. That is certainly
the view we take, and I do not want to repeat what I said to Lord
Eames, but everyone will have to play their part and we will play
our part as a Member State in this, and the Commission and the
Presidency have their part to play too.
Chairman: I think what you are hearing from the Committee
is that some of us have happily lived with it a long time and
would like to see it not fall apart, but we were particularly
exercised in some of our previous investigations about SiMAP
and Jaegar and Lord Kirkwood is going to follow on that.
Q12 Lord Kirkwood of Kirkhope: Minister,
governments are never perfect, but I think that the progress that
you have made is really exceptional, and that is to our advantage.
Obviously the European Court of Justice (ECJ) put pressure on
all the Member States over the SiMAP and Jaegar
judgments. Could you just take us through in detail whether the
agreement you got is actually a perfect fix for the problems that
arose from these judgments because that is of interest to us all,
but for special categories of workers, like health workers and
lorry drivers, could you just explain a little to what extent
you got everything that you needed to resolve the conflicts that
arose from SiMAP and Jaegar?
Mr McFadden: I will say something, but
I might bring Giles in because he knows about this in great depth.
The SiMAP and Jaegar judgments did create a difficulty
for a number of Member States and, again as committee members
here know, this is about defining the rest time or inactive time,
if you want to call it that, as working time, and then also about
the rest periods that need to take place between different shifts.
Obviously, the sectors that that has created the most difficulty
in have been probably health and social care. Now, in the UK we
have adapted to that by very substantial change in the way that
the health sector works, a move far more towards shift working
than on-call working in the NHS, although there is still some
on-call working and I do not want to pretend that it has gone.
What will the changes made in the agreement on 9 June do? Well,
they will allow Member States to not regard that on-call inactive
time, if you want to call it that, as working time. They also
give more flexibility about the rest periods that have to be taken
in between working shifts, so, in the health sector, for example,
someone who is a trainee surgeon or a doctor might be able to
find, how can I put it, a better-suited working pattern to make
sure that they are getting the maximum value in terms of their
training or their experience out of the time that they are at
work rather than having to count time when they are on-call, not
actively working, as working time. The effect of that up until
now has been to reduce the amount of available time to, if you
like, active working in their working week, so it will have that
benefit of being able to use that time better for someone like
an NHS worker, and again in the care sector it will have an application
there. Giles, do you want to add anything to that?
Mr Smith: No, I think you have covered
the main points. As the Minister has pointed out, the solutions
to the SiMAP and Jaeger judgments that were agreed
in June will not mean a wholesale reverse back to on-call working,
it will just mean that there is increased flexibility for working
patterns to be developed that will deliver better balance between
patient need, doctors' training needs and doctors' work/life balance,
and it will enable Trusts to come up with patterns that can meet
all those objectives. There are instances, for example, more isolated
hospitals, where it is very difficult and not cost-efficient to
be on shift-working patterns, so it just enables them to have
greater flexibility to work more productively.
Q13 Lord Kirkwood of Kirkhope: Are
there any other sectors that these new changes to the 9 June agreement
will start to create problems for? Have you identified any sectors
for which there will be a downside from the agreement that you
have struck? You seem to be saying that SiMAP and
Jaegar are fixed and that is positive and excellent, but
this will not have any perverse, unintended consequences on any
other sectors that you can foresee?
Mr Smith: Not that we can foresee, absolutely
not, no. There are other sectors outside the health sector, the
offshore sector, for example, and the Minister has mentioned some
others, where there is going to be a positive development.
Chairman: Giles, I need to apologise to you because
at the beginning I did not ask you to introduce yourself for the
record. We were so excited about getting into the content. Lord
Lea is going to follow through on this opt-out issue.
Q14 Lord Lea of Crondall: As you
will know from the list of questions, the first of these two relates
to the quite complicated business of 60 hours and 65 hours, and
there would appear to be the question of limiting in one week,
and then there is the averaging principle and there is the availability
of the opt-out. What is your view of the 60- and 65-hour limits
set out in Article 22(d) and, in particular, what are the implications
of the inclusion of the inactive part of the on-call time in the
65-hour limit? It is two different points really.
Mr McFadden: This is a brave step for
us all, getting into the territory of—
Q15 Lord Lea of Crondall: Well, someone
has got to understand it at some stage!
Mr McFadden:—reference periods, so
let me plunge forward. Article 22(2)(d) of the revised Working
Time Directive sets out these maximum weekly working limits, but
it is very important to see these in the context of what we refer
to as a `reference period'. That is to say, if I take the 60 hours,
for example, what this means is that there would be a limit of
60 hours for a working week, referenced over a three-month period,
so that does not mean in any particular week you cannot work more
than 60 hours, you can, but your average over the three-month
reference period must be no more than 60 hours. And it is the
same concept with the 65 hour maximum cap. Now, what is the difference
between the two, is, I think, the core of your question. The 60
hour cap applies when the inactive part of on-call time is not
counted as working time, going back to Lord Kirkwood's question.
The 65 hour cap applies either when there is a collective agreement
to have a 65-hour limit or for when there is not a collective
agreement but where a Member State has decided not to use the
SiMAP and Jaegar changes by not counting the inactive
part of on-call time as working time. If I could give a Member
State as an example, France has indicated that it does not intend
to use the flexibility in the revised text to not count inactive
on call time as working time.. It is complex, but I hope that
explains it.
Q16 Chairman: So France, for example,
will say 65 hours' average, but will include the inactive part
of on-call time as working time?
Mr McFadden: Correct.
Q17 Lord Lea of Crondall: I am very
grateful and, on behalf of the Committee, I think we are all very
grateful for that very clear reply. I think we thought that is
what it meant, but it is nice to know that you are so clear that
that is what it means because out there in Burton-on-Trent somebody
has got to understand this at some point along the line. The next
point, of which you have had notice as well, is what concerns,
if any, do you have about the requirement set out in 24(a) for
Member States to report to the Council and the European Parliament
about the operation of opt-outs from the weekly hours limit?
Mr McFadden: The short answer is no,
we do not have concerns. The slightly longer answer is that these
kinds of review and reporting clauses are a normal part of Directives.
This Article actually represents an important gain for the UK
because in previous drafts, not the draft in December that we
considered, but in previous drafts over the years this part of
the Directive had contained assumptions that the opt-out would
be phased out, there would be an end date, there would be a gradual
phasing out, this kind of language. That language has gone from
this part of the Directive, so there does have to be a reporting
on how Member States are using the opt-out provision and who is
affected by it, which is then considered by the Commission, but
there is no presumption in that reporting and review, and that
is the critical gain for the UK compared to previous drafts of
the Directive. So we are perfectly happy with a reporting and
review clause which says, "You've got to come back and tell
us how you are using this provision". There is absolutely
nothing wrong with that, and the important gain for us is that
there is no presumption in here that the capacity to use the opt-out
cannot continue in the future.
Chairman: We want to move on to reconciliation with
family life, which again the Committee is very interested in.
Q18 Baroness Perry of Southwark: Minister,
my question is about the new Article 2(b) which encourages social
partners to find ways of better reconciling balance between work
and family life. What is your view of that and what impact, do
you think, either good or bad, will it have in the UK context?
Mr McFadden: We were content with the
words in the new Article 2(b). This is an important area. The
reconciliation of work and family life is important for all Member
States. I think that there were significant gains made in the
UK on this broad theme in recent years. We have got extended maternity
leave, maternity pay and so on and we also have flexible working
for many employees and, specifically, as far as the law goes for
parents of younger children and carers. Again, the important thing
for us about this clause is that it is permissive, it talks about
encouraging business to consider these requests and it also, if
my memory serves me right, refers to taking into account the needs
of the business. That fits exactly with the model of flexible
working that operates in the UK because our flexible working model
is that this is a right to request, it is not an absolute right
to have, and business can legitimately say on a number of grounds,
"I understand your request, but this week", or this
month, "I am afraid that's not possible because we have a
specific business need". Since that was brought in, it has
worked quite well and, in discussing this part of the Directive
in the negotiations, we were keen to ensure something that would
fit with the right to request model for flexible working which
we operated in the UK, which has been successful, I think, because
it is a right to request and because it has balance built into
it. It does attempt to recognise what we call here the `reconciliation
of work and family life', but it also recognises that there are
business needs and there is the employer's need that has to be
taken into account here too, so we were content with these words
and we think it fits with the policies that we have been operating.
Q19 Baroness Perry of Southwark: I
think there is good evidence that, where these agreements are
reached, it actually does help the business case that employees
feel better about their lives. Can I move on now to the new Article
5(4) in the text that was agreed on 9 June. To what extent do
you feel it meets all the requirements of this country, of the
UK, and are there any aspects of it which leave questions open
for the future in relation to the way in which the equal treatment
of temporary agency workers is applied here?
Mr McFadden: Well, I said in relation
to the first question that we had reached an agreement between
the CBI and the TUC on how equal treatment for agency workers
would operate in the UK. What Article 5(4) does is it allows us
to implement that agreement, so there was a lot of careful negotiation
about these couple of paragraphs, they are very important to the
UK and, we believe, they do allow us to implement the agreement.
For example, if I can take a couple of specifics, the new Article
5(4) refers to the capacity to have a qualifying period, and there
is a qualifying period in the TUC and CBI agreement, of 12 weeks.
It also allows Member States not to include occupational social
security schemes as distinct from statutory benefits. That too
is built into the agreement reached between the TUC and the CBI,
so, in different ways, this Article allows us to implement that
which was agreed and announced in May. It is a good area to focus
on actually because what it shows us is how the domestic process
and the European process have knitted together here. It was not
enough for us to simply reach a domestic conclusion on the treatment
of agency workers if that could then have been second-guessed
by a Directive that would have pulled us in a completely different
direction, so what happened between December and June was that
we were able to reach a domestic conclusion, the validity of which
was then recognised in the European Directive, thereby removing,
if it is ratified by the European Parliament in its current form,
the danger that the domestic agreement would simply be turned
over by a Directive doing something different. That is why it
is important that this holds together as a package.
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