Workfare ruled illegal, but only on narrow terms

A minor victory for campaigners against mandatory work

Cait Reilly, the graduate who was forced to work for free at Poundland, has won her Court of Appeal claim that to do so was unlawful.

Reilly was joined in her appeal by Jamieson Wilson, an unemployed HGV driver who had been required to clean furniture for six months under the government's Community Action Programme. When Wilson refused, he was stripped of his jobseeker's allowance for six months in sanction.

The solicitor for the pair, Tessa Gregory, told the Press Association:

Today's judgment sends Iain Duncan Smith back to the drawing board to make fresh regulations which are fair and comply with the court's ruling.

Until that time nobody can be lawfully forced to participate in schemes affected such as the Work Programme and the Community Action Programme.

All of those who have been stripped of their benefits have a right to claim the money back that has been unlawfully taken away from them.

The ruling is not a universal victory for opponents of the government's workfare programmes, however. It rules that the schemes are illegal on fairly narrow technical grounds to do with the expressed powers of the secretary of state.

The schemes in question did not match with published policy, and Reilly and, in part, Wilson had not been notified correctly about their rights. (Reilly should have been given the option to refuse her scheme, but she was not; Wilson was not informed clearly enough that refusing would result in six months without benefits).

As a result, Mandatory Work Activity, which involved nearly 17,000 people being compelled to do a month's full-time unpaid work between May 2011 and February 2012 alone, is unaffected by the case. And there is every chance that re-drafted legislation could enable the other workfare programs to resume.

Crucially, although the case included a reference to article four of the European Convention on Human Rights, which states that "no one shall be required to perform forced or compulsory labour," the presiding judge held that that did not add anything to the substantive legal issues at hand, concluding:

Given arrangements properly made under the Act, article 4 would not be engaged.

Similarly, the court finds no overall problem with the concept of unpaid work, arguing that Parliament has the right to create schemes that "are designed to assist the unemployed to obtain employment", and that it is "equally entitled to encourage participation in such schemes by imposing sanctions."

In short, the case was won because the government failed to legislate correctly when introduced the workfare schemes in question. That's a very different, and much less heartening, conclusion than original reports claiming a victory on grounds of "forced labour" suggested.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.