The Employment Rights Bill – which underwent significant changes this week – could benefit the UK economy by over £10bn per year, research exclusively shared with the New Statesman by the Trades Union Congress (TUC) and Landman Economics reveals. The research counters a growing political narrative, that the costs incurred by businesses implementing the new workers’ rights the bill promises, would serve as a net-negative for the country’s finances when squared with its intended benefits to workers.
This assessment by the TUC accounts for some of the wider, holistic benefits that are hoped to come from the bill – the endpoint of Labour’s manifesto pledge to introduce a “New Deal for Working People”. The added rights and protections afforded by the bill – with quicker claims to sick pay, stifling “fire and rehire” practices and zero-hour contracts, in addition to wider union freedoms – could, this new analysis suggests, bring a yearly net benefit to the economy of between £4.9bn and £15.7bn per year. (Its “central estimate” is £10.3bn.)
“Where do those gains come from? They come from the fact that people are in more secure, better paid employment, which has a positive impact on productivity,” Paul Nowak, secretary-general of the TUC, told me. The bill will “help reduce absenteeism. It encourages people back into work; people have that opportunity to work flexibly. [New] ‘guaranteed hours’ will mean that when people make that move into work, they’ll know exactly what’s going to be in their pay packet from one week to the next.”
Nowak added: “We think this is a win-win. A win for workers, but also a win for the UK economy.”
The contary assumption comes from the government’s own impact assessment on the bill (which is at its final stages of the parliamentary process). The government assessment provides a estimated range on the potential financial impact of the bill. It suggests that potential “costs” to businesses could range between £900m-£5bn per year. According to the same analysis, workers could collectively receive direct benefits of up to £500m per year. The “net” impact of the bill – accounting for business costs and workers’ benefits – is predicted to be negative: -£280m per year. In its assessment, the government acknowledges that its review does not account for the full positive financial benefits that would come from the bill. “This is a partial assessment, reflecting that it is often easier to quantify and put a monetary figure on costs than it is benefits, and should not be interpreted as the total impact of the Bill.” It added: “We believe the non-monetised benefits to be significant and will likely more than offset the costs.”
Despite this key clarification, the narrative around the “costs” of the bill, in particular the headline £5bn top-estimate, has snowballed. Speaking at the CBI on Monday (November 24), Conservative leader Kemi Badenoch called the bill an “anti growth blueprint”. She later added: “This bill does not raise a single pound in revenue… It does not add a single unit of productivity. It is a pure political project, [and] killing it will be a sign to the world that Britain still understands what makes an economy grow.”
Nowak challenges Badenoch’s assumptions, and argues that the holistic benefits the TUC’s research accounts for is clear evidence that the bill will “provide a massive boost of millions of working people… [and] also boost the UK economy more broadly.” Nowak added: “When it comes to the Employment Rights Bill, we hear a lot from the right wing press about the ‘cost’ to employers.
“There are some costs that will fall on some employers. If [businesses] use zero-hours contracts at the moment, if you don’t pay sick pay from day one, you will face some additional cost. But their cost will effectively go from being borne by low-paid workers – and what the bill will be asking employers to do is pay a fairer share.”
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