9th Report Contents

Appendix 1: Correspondence: Draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022 and one related instrument

Letter from Lord Hodgson of Astley Abbotts, Chair of the Secondary Legislation Scrutiny Committee, to The Rt Hon Kwasi Kwarteng MP, Secretary of State for Business, Energy and Industrial Strategy, Department for Business, Energy and Industrial Strategy

Thank you for your letter of 23 June 2022 in which you asked for the scrutiny of these draft Regulations be expedited. As requested, we considered the instrument at our meeting yesterday (5 July). Our discussion, however, raised several concerns and questions about the legislation which we would like to put to you before we report to the House on the draft Regulations:

I would be grateful for your response by 10.30am on Monday, 11 July to enable us to share it with the Committee before our meeting the following day.

6 July 2022

Letter from The Rt Hon Kwasi Kwarteng MP to Lord Hodgson of Astley Abbotts

Thank you for your letter of 6 July regarding the Draft Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022.

I am grateful for the committee’s early consideration of these regulations and have responded to your specific comments and questions below.

Impact Assessment

I apologise for the delay in publishing the impact assessment. This is enclosed and will be published alongside the EM today.

As the committee will note, this is a permissive change, employers will only hire agency workers when the net benefit is positive.

In order to estimate the impact of this measure, we would need to make a number of assumptions and do not have the evidence to do this. The IA therefore uses a simple model that looks at the impacts from businesses impacted from industrial action and carried out break even analysis. This shows that if agency workers were able to reduce annual average working days lost from industrial action by 2%, with around half the productivity of regular workers, then the impact of this policy would be neutral (break-even). This does not include non-monetized impacts, most notably the wider (significant) benefits on the rest of the economy if employers facing strike action can maintain some activity. Hence, we are confident that this policy change is likely to be net beneficial, however, we are unable to robustly estimate the size of this impact.

Consultation Obligations under section 12(2) of the Employment Agencies Act 1973

Thank you for passing on the observations of the TUC regarding our obligations under the above act. In our view the 2015 consultation discharges this obligation and there is no need for an additional exercise.

As the Explanatory Memorandum sets out, the consultation itself was thorough and elicited a large number of responses (167 in total) and from a wide range of different types of stakeholders. While we accept that circumstances have altered in some ways, we do not think these are particularly relevant to the changes we are proposing to make. As such there is no reason to think any new groups of stakeholders would respond or that they would raise new points.

The forthcoming parliamentary debates will, of course, provide MPs and Peers the opportunity to provide further feedback for government to consider.

Reason for the gap between consultation in 2015 and implementation now

As set out in the explanatory memorandum following the consultation in 2015 the Government decided that it was not the right time to proceed with the removal of regulation 7.

The main reason for this was that the Government was already making a number of other reforms to the industrial relations framework through the Trade Union Act 2016. Ministers at the time decided that it would be better, given limitations on resources and parliamentary time, to focus on this important legislation and delay other changes.

In the years that followed the implementation of the Trade Union Act, Government time was necessarily taken up with: 1) preparations for the United Kingdom leaving the EU; and then 2): Dealing with the extraordinary challenges of the Covid pandemic.

Now that the Trade Union Act has been in place for some time, we have taken the opportunity to consider, once more, whether our industrial relations framework strikes the right balance between the important right of workers to strike and the rights of the public to go about their daily lives unimpeded. In doing this, I have come to the conclusion that removing this regulation is the right thing to do.

Trade Union (Wales) Act 2017

As my officials have set out to your adviser, the Government was clear when the Trade Union (Wales) Act 2017 was passed that it would seek to reverse it once the Wales Act 2017 gained Royal Assent.

The then Secretary of State for Wales (the Rt Hon Alun Cairns MP) wrote to the Chief Executive and Clerk of the National Assembly for Wales in August 2017 (in response to her letter informing him that the Bill had been passed) making this point.

Before the Wales Act 2017 there was some debate about the extent to which the Welsh Assembly was able to legislate in the area of employment and industrial relations practices in respect of public bodies in Wales.

The Wales Act 2017, while devolving significantly more powers to the Welsh Assembly, put this matter beyond doubt by making clear that Employment and Industrial relations were reserved to Westminster. Section 108A Government of Wales Act 2006 (as amended by the Wales Act 2017) provides that legislation made by the Senedd (Assembly) is only law if it is within the legislative competence of the Senedd. Any provision of the Senedd is outside the legislative competence if it relates to any of the reserved matters specified in Schedule 7A. Schedule 7A of the Government of Wales Act 2006 specifies that employment rights and duties and industrial relations are reserved including the subject-matter of the Employment Agencies Act 1973. The Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2022 are made under the Employment Agencies Act 1973.

As the commitment to legislate to override the provisions in the Trade Union (Wales) Act 2017 is not new, we did not specifically discuss this with the Welsh Government in advance of this latest set of announcements. We did, however, write to the Minister for Economy (Vaughan Gething) on 24 June, in advance of these regulations being laid, to notify the Welsh Government and explain the rationale for our proposals on agency workers and unlawful damages.

When we identify a suitable primary legislative vehicle to amend the Trade Union (Wales) 2017 Act we will engage further with the Welsh Government. Consideration will be given at that point to whether their legislative consent is required. I am not aware of any other direct precedent. As set out earlier in the letter this situation arose out of a particular ambiguity in the way devolution operated in Wales before the Wales Act 2017. The reserved powers model set out in this Act provided for a much clearer separation of powers. This model (reserved powers) already underpinned the devolution settlement in Scotland.

I trust that these answers are helpful to your committee.

11 July 2022

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