John Oxley: Labour seem determined to drive up unemployment, again

JOHN OXLEY

John Oxley is a consultant, writer, and broadcaster. His SubStack is Joxley Writes.

It is a fact ingrained in every Tory activist’s memory: every Labour government has left unemployment worse than they found it.

The observance serves as an easy shorthand for the threat of Labour economic mismanagement and the second-order effects of tax rises and interventions in the Labour market. Barely nine months into this new period of power, Starmer and Reeves seem determined to make it happen again, actively leaning into political choices that will make it less attractive to hire people and, therefore, harder to get a job.

First came the National Insurance hike.

With a pledge not to raise taxes on ordinary people, the Chancellor made businesses pay the price, increasing both the rate of tax and the level where it kicks in. Now, Labour is pushing forward with a plan to “beef up” employment rights, with expansions of parental leave, sick pay and protection from unfair dismissal.

These plans may be popular with voters, but the consequences may not be.

Each of these plans increases the costs of hiring people. Some of these moves bring explicit expenses, while others bring greater administrative burdens, especially around hiring and firing. For small and medium businesses especially, these can be the difference between a hire being economical and unaffordable. The plans fail to contend with the reality of the decisions employers have to make – if it is too costly and burdensome to take someone on, you simply won’t. They threaten to push us towards a more European model, where benefits are good for those in secure work, but jobs themselves are harder to find.

Labour perhaps has reasons for embracing this.

Since the financial crisis, employment rates in the UK have stayed surprisingly high. The cost has been borne elsewhere, however, in productivity and wage growth. Controlling unemployment was perhaps one of the great economic (and political successes) of the 14 years in power. It responded more quickly after 2008 than in previous recessions, and even after COVID, there were record numbers of job vacancies and people in work. While other European nations saw unemployment, especially among the young, surge, we avoided that fate.

It was a double-edged achievement, however.

A little tolerance for unemployment can be a good thing. If hiring people is hard, it encourages workers to be sorted towards more productive roles. Employers are encouraged to invest in equipment rather than adding in extra, cheap labour. In many sectors in Britain, we have become reliant on the latter, fuelled by rising immigration. A break on cheap jobs could help kick Britain out of this low productivity cycle.

It might also help the government deal with that other threat – inflation.

Increased costs for businesses can slow down wage growth, while unemployment typically leads towards less consumer spending. The government is still struggling with high food inflation and is further pressured by the impact of Trump’s tariffs, so this could be a welcome lever. It is, however, a risky one. There remains a real chance the economy may slip into recession, with further job losses and even more unemployment. This will be politically and economically disastrous.

The noticeable thing about Labours track is that they are raising both the costs and hassle of hiring people. This suggests one of two things. Either it is a deliberate choice to go all-in on risking unemployment or, more likely, a strategic incoherence. The Treasury wants to raise funds and so sees employers NI as a good way to do it. The party also wants to improve workers’ rights. It doesn’t see how these go together when employed. They are missing the impact it could have on growth.

Raising the cost of employment alone could help shift people into more productive jobs. The increased employment rights, however, act as a break on this. To absorb the people pushed into unemployment by the NI rises, you want to encourage new businesses and new ventures to take a punt on hiring. Making it harder to shed workers does the opposite. Businesses generally don’t want to get rid of people but do want to have the flexibility to expand and contract their workforce. Adding extra burdens to the employment relationship will be a drag on good employees, perhaps even more so than it is a discouragement to bad ones. If rapidly growing firms are thinking twice about taking people on, the entire economy suffers.

For a government looking for growth, they risk swinging too far and stifling the labour market. These measures could bring the (perhaps necessary) destruction to jobs at the margin, but without the creativity to replace them. That, in turn, would damage our economic prospects and push more people out of work and into the benefits system, crashing against Labour plans to get welfare spending down.

A stuck jobs market could be the worst of all for labour. It will push up spending and hinder growth. More than that, it will drive the sort of spike in worklessness that governments usually work hard to avoid. High unemployment is obviously politically toxic and spirals into declining towns and worsening societal conditions. The Tory government of the last 14 years knew that high employment had impacts on productivity and wages but also understood this was easier to weather than people out of work.

The government is choosing to make Britain a more costly place to employ people. They hope it will work out for the best, pushing Britons into more productive, higher-yielding roles. It is not necessarily the worst idea. After all, Mrs Thatcher began her time in office allowing unemployment to rocket in the hope that it would bring better gains later on. Yet pulling on both leavers, driving up the total cost of employment, and with regulations that deter new hiring, it could have the opposite effect.

We have come to expect Labour governments to lead to higher unemployment. Rarely, however, have they launched into it so deliberately. Hiking National Insurance and bulking up workers’ rights are likely to cool the job market. Time will tell whether that will pay off.

There is every chance the Tories can go into the next election repeating their own line about Labour’s jobs record – and finding a willing audience who have been at the sharp end of it.

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This article (John Oxley: Labour seem determined to drive up unemployment, again) was created and published by Conservative Home and is republished here under “Fair Use” with attribution to the author John Oxley

Andrew Griffith: Labour’s Employment Rights Bill will not increase employment and isn’t right

ANDREW GRIFFITH MP

Andrew Griffith is the Shadow Secretary of State for Business & Trade

Welcome to Labour’s ‘disco of discontent’.  We have all the old hits line up to you, whether you’re trade unionist, a work-shy lefty, or a full-time socialist: DJ’s Rayner, Reeves and Reynolds (aka ‘The Job Killers’) will be rocking your favourite 1970s hits.

That, with some creative license taken, is the fearful reality that businesses face in a few months’ time.  A summer of the Chancellor trash talking the economy, then a budget of broken promises which have predictably delivered a per-capita recession.

But if this was the initial assault, next week marks the beginning of the ground invasion as Labour seek to upend decades of settled employment law that could see Britain remade as one of the worst places to employ people. That is the promise of the misleadingly named Employment Rights Bill.

This trade union inspired tome runs to almost 200 pages and over 130 individual clauses.  If that sounds like a lot to cover in one ConHome article, consider how much work it will be for the millions of small businesses across the UK.

Instead, here are the five worst tracks on the album that will take us straight back to the 70s filled with Scargill, strikes, and stagnation.

Short notice strikes

For decades all major parties recognised the collateral damage done by industrial action.  Train drivers or railway workers going on strike doesn’t just affect those they negotiate with.  These strikes ripple across the entire economy with businesses and individuals scrambling to adjust to disputes they have no influence over.

Now labour plan to cut notice to just 10 days.  Why? So strikes will hurt more! The result could be billions more lost in the economy.  Even public services will struggle.  A railway strike could mean hospitals struggling to staff wards at the last minute and patients suffering as a result.

The Banter Ban

As if pubs have not suffered enough following a rise in employer NI (and a cut in the threshold it begins to be paid at), rising business rates, and the family business tax, landlords are now being conscripted into Labour’s banter police.

While nobody would argue against preventing sexual harassment (a separate provision of the bill), Labour have gone further and now want businesses including pub landlords, sports venues, and universities to prevent their employees from even overhearing third party conversations they might find offensive.

The reality will be a crackdown across the country with pubs required to serve up pints of woke lest the most fragile of snowflakes take offence.

The end of flexible and seasonal hours

In an attempt to end ‘zero hour’ contracts, the Government have thrown the baby out with the bathwater, opting to ban any kind of flexibility in contracts.  Even when it’s the employee wanting the flexibility.

The result in retail and hospitality is catastrophic.  Being forced to offer set ‘guaranteed hours’ means that even where a hard-working student working part time wants to pick up extra hours over his holidays, businesses who need the manpower won’t offer them.  The result is poorly staffed shops at peak times and poorer workers.

A return to picket punch ups and workplace intimidation

Where the bill piles on the red tape for businesses, it is conspicuously doing quite the opposite for trade unions.  Requirements to have properly trained picket supervisors and to bear responsibility for what goes on at their own pickets are dropped, along with the Code of Practice that governs picketing.  Sadly, the consequence could be a wholesale return to the tactics of the 70s that saw flash mobs, intimidation of families at their homes and even violence become commonplace again.

Similarly, the introduction of digital ‘swipe to strike’ ballots remove protections designed to stop trade union reps from bullying workers into voting to strike at the workplace.  It makes as much sense as having the Government look over your shoulder as you fill in your ballot at the election.

Who funds you? Follow the money.

Where is the upside in all of this?  Why are Labour so keen on a Bill that will kill growth at a time the economy is struggling and the Prime Minister talks of being on a ‘war footing’. Look no further than the Bill’s provisions on the ‘political fund’.  This is money unions collect, and which members normally opt-in to.  It ends up making up the tens of millions Labour received from unions in the last Parliament.  It also funds countless other far-left causes.

The Bill changes the political fund to an opt-out subscription trap.  It’s the same sort of trap that the Government themselves opposed when it’s used to sell beauty products or phone contracts.  The result will undoubtedly be a herculean boost to Labour’s coffers and perhaps explains why so many on the Government benches are so excited about this “once in a generation deal”.

So, if after reading all that you’re starting to hear the sounds of the 70s ringing in your ears, you’re probably not alone.  This bill would do immense damage to the economy – much of it long lasting.  There is a reason why Tony Blair and Gordon Brown chose not to undo decades of careful trade union reforms: even they recognised how dangerous it would be.

Unfortunately, Keir Starmer has repeatedly shown himself to sit far to the left of Blair and has no such compunctions.

The Conservatives will be opposing this bill next week when it returns to the chamber.  We are putting forward amendments to stop the horrors listed above and much more.

Nonetheless, we can’t do it on our own.  The best thing that could happen to this bill for now would be for Labour to recognise the danger coming down the track and to, at the very least, press pause.  So, if you’re the ‘writing-to-your-MP-type’, now may be a good time to do so.

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This article (Andrew Griffith: Labour’s Employment Rights Bill will not increase employment and isn’t right) was created and published by Conservative Home and is republished here under “Fair Use” with attribution to the author Andrew Griffith MP

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