116. Are We Sacrificing Growth For Worker's Rights?

0:11Hello and welcome to The Rest is Money with me, Robert Peston. And me, Steph McGovern. So today we're joined by the General Secretary of the Trades Union Congress. That's the body that represents all trade unions. Influential in terms of saying what they think workers need and want. He's called Paul Nowak. And there's obviously loads to talk about in terms of what's happening with workers and employers because we've had not just the new government coming in, but all the changes that they want to bring in around employment rights and get Britain working. That's the latest white paper we've had this week.

0:47And on top of all of that, we've had the budget making it more expensive to employ people. That's what businesses are saying. So loads to talk to Paul about. So here's our interview with him. Paul, thanks very much for joining us. There's obviously loads going on at the minute in terms of employment. And everyone's talking about it, whether it's getting more people into work. You know, it's businesses saying that employing people is going to be more expensive now because of the budget. And then we've got the employment rights bill. And again, businesses are saying this is going to make it more complicated and there could be less risky in terms of who they employ.

1:25Do you think there is a conflict here in terms of the policies of the government wanting to get more people in work at the same time as businesses saying, hang on, we're probably going to have to let people go? Absolutely no conflict at all, Steph. Well, first of all, I think it's great that people are talking about work, talking about how we get more people into work, but also how we make work rewarding. And I suppose rewarding in every sense of the word, because rewarding in terms of pay, but we also want people to go to work and feel valued, that the job they do makes a difference. I think the government is absolutely right.

1:57I mean, the legislation is called Make Work Pay. And the right to focus on making work pay, because for far too many people at the moment, work doesn't pay. It's low paid. It's insecure. We've got a million people on zero hours contracts. I mean, I grew up in Merseyside in the 80s and 90s, and being in poverty then was a function of being out of work. Now 70 % of the kids who live in poverty have at least one parent who goes out to work. So there is something fundamentally broken about our labour market, and I think the government is absolutely right to take that on. Funnily enough, and I know we'll get onto the Employment Rights Bill, I gave evidence to the Bill Committee yesterday, and I made the point to Nick Timothy who was on the Bill Committee.

2:34Theresa May, going back in 2016, 2017, thought there was a problem with the world of work. She commissioned Matthew Taylor to undertake his review of modern employment practices. Massive report followed 50-odd recommendations. Successive Conservative governments promised 20 times or more in the House of Commons that there would be an employment bill. They didn't deliver one. So I think it's great that we've got a government that's committed to that new legislation and improving the world of work. I mean, on this program, we've repeatedly said that the low wage model of the economy that we've had in this country for 20 odd years was unsustainable.

3:10You might say ethically wrong. The idea that people are working every hour of the day instead of have to go to food banks is plainly just not appropriate for a country as rich as we are. And the other impact of all of that was employers chose to substitute cheap people for investing in a way that would have improved productivity and indeed improved living standards. But I'm afraid to say, I do agree with Steph that right now there seems to me to be a conflict at the heart of government policy. Because there is absolutely no question that everything that's going on at the moment does put up the cost of employing people.

3:56which if you actually have a plan at the moment to grow the economy and to encourage investment, then you'd say, fine, it's all going to come good because employers are going to have the confidence to take these people on and pay them more. But right now, I have to say, neither of us can see the growth plan. The budget actually achieved nothing in terms of expanding the economy or indeed improving living standards. Well, I just fundamentally disagree. What did the budget do that would grow the economy in a way that we can be confident of? Because pretty much every forecaster says there's nothing here that's going to grow the economy.

4:37There's work in progress elsewhere, and let's just see what they do. But they haven't announced yet anything that looks like a proper growth plan. Let's look at one practical example,£22 billion over the next two years for the NHS. That's important for those people who are sat on NHS wait lists. over 2 million of those people are of working age people who can't go to work because they're stuck on an nhs waitlist we did a survey of employers a few weeks ago 60 of employers said that they've had troubles with staff taking time off because they're stuck on an nhs waitlist their kids can't access special educational needs provision fixing our public services and i don't think there'd be anybody listening to this podcast they would say that there is a single public service better now than it was 14 years ago fixing our public services is i'm not going to use the Chancellor's language of fixing the foundations, but is essential to have a successful growing economy.

5:26I think when you take that alongside things like the National Wealth Fund, Great British Energy, the Industrial Strategy, there definitely is a plan for growth. Now, that's a - There's a framework, possibly a framework. I would disagree there was a plan because we don't yet know which projects they're going to be investing in. We just haven't got the detail. I appreciate that there isn't enough detail in some areas. We have had some detail, for For example, the investments in carbon capture and storage, the detail around the beginners of great British energy, the eight sectors that the industrial strategy will focus on.

5:57But just to be clear, let's just look at carbon capture and storage. I have no disagreement that this is an important thing to do because we all want CO2 emissions to be reduced. Find me an economist who thinks that is going to do anything for productivity because it isn't, right? It's an important project. It might create some jobs. It's going to do nothing for productivity. I disagree again, Robert, because I think it's essential to secure the future of our energy intensive industries, whether it's chemicals or automotive or steel, which has obviously been in headlines in the last few months.

6:26But that's preserving what we've got. It is not increasing output per worker or output per hour. Well, I think when you take that alongside the broader industrial strategy, the investment in things like Skills England, I think it is a government that clearly, unlike the previous governments, has got a plan for growth. And I think good quality employment is also at the heart of this because at the moment, each and every single one of those low-paid, insecurely employed workers that goes out to work every day, we subsidise as taxpayers through the tax credit system. So it's absolutely right to ask employers to pay their fair share.

6:55I mean, the government's impact assessment of the Employment Rights Bill said it costs something like 0.4 % of the pay bill. That will overwhelmingly be picked up by those employers who at the moment don't pay sick pay, do use zero hours contracts don't give people decent rights at work i think that's a price worth paying to give low paid insecurely employed people and more stability at work are you not worried though that you know some of our biggest employers are saying that they will probably have to cut their headcount because it is more expensive to employ particularly young people part-time people low-paid people they're they're the key ones here that they're saying are going to be i mean part of the problem of being an all fart stuff is that you've seen these arguments come around time and time again.

7:37I mean, so going back to the introduction of the national minimum wage, I just started work at the TUC. We had employers and employers' organisations send the introduction of the minimum wage would cost up to a million jobs that send the UK economy off the edge of a cliff. And that didn't happen. I don't think that the proposals in the Employment Rights Bill will do that either. But Paul, sorry, I've got to remind you, when the minimum wage was introduced, the economy was growing at 3 % per annum. It's barely growing at all at the moment. The economic background to this rising cost is totally different.

8:08But Robert, if you listen to some of the voices from the business community, you think that no companies in this country ever made a profit. And they were all struggling to get by. So let's take one of the big UK retailers. I think announced profits last year,£2.3 billion. The increase in national insurance will cost them£250 million. You're talking about Tesco. I'm not naming names. I mean, there are a number of employers in a similar sort of situation. All of the warnings are that that is going to have to be passed on to consumers or to workers. The only thing that's absolutely sacrosanct is dividends.

8:44And so I think there is time for a national conversation about employers paying their fair share. Most employers will factor this in. Next year, I suspect for some employers, will be tight. But actually, it also drives demand in the economy because our members who are working in those jobs in and around the minimum wage who are currently on zero hours contracts, if they're paid more, they don't squirrel that money off in an offshore bank account or save it away for the rainy day. They're the people who spend it in local bars and restaurants, who get the local builder to come down and build an extension, or they take the risk and buy a new car.

9:17Now, the last 14 years, real wages grew by 0.3%. 0.3%. That has obvious impacts on the people that I represent. It's not good for the UK economy. We've agreed that it's not good for the UK economy. What we're talking about is if you want to transform the UK economy, how you phase that. And I would argue it would have been better phasing to promote growth before you increase costs. I think that that whole plan around the employment rights bill is part of the government's growth plan. I don't see any contradiction in it whatsoever. And I think actually what it also does, Robert, is level the playing field for decent employers.

9:55As I said before, I go and visit workplaces up and down the country. Most employers do pay sick pay from day one. Most employers wouldn't dream of using zero-hours contracts. They certainly wouldn't threaten their staff with firing rehire. And underneath all the bluster, let's remind ourselves that the biggest issue, and I can guarantee it almost to a fault when you go and talk to employers, that they all have is that they can't get hold of enough skilled staff. So I think the economy can well afford these measures, and I think they're important for workers, but employers as well. I mean, Steph and I, and Steph in particular, obsessed with improving skills.

10:29But again, you know, we haven't got the detail of Skills England yet. So, you know, it's all very well to say there's a shortage of these people, which of course there is. It's one of the game, one of the flaws in the British economy. But again, where's the urgency? Well, I'd be in violent agreement with you, Robert. I mean, I want to see the detail around Skills England as well. And I want unions around the table because we've got a skills system at the moment where employers in the UK invest about half of the EU average in skills, workplace skills. And so it's absolutely right. The government's working with unions and employers, thinks again about skills.

11:00The sooner that comes, the better. Yeah. Can I just pick up a point you were talking about there to do with the rights from day one? Do you not agree then with businesses saying that they will take less risk when it comes to employing people? Because the people the government are on about trying to get back into work are people who, you know, quite a lot of them might be long term sick. It's people who are potentially going to be more of a risk for a company to take on because they then might have to go off sick for whatever reason. Do you think they're making that up? I don't think it's a case of making up stuff.

11:31I just think that they're arguing the wrong points. I mean, take health and social care. We've got 300 ,000 staff vacancies in health and social care. We are desperate as a country to get people to work in social care. At the moment, social care is a sector that is predominantly one and four on zero hours contracts. The minimum wage is quite often the prevailing wage. It's not seen, or it should be seen as a sort of high value sector. I think employers will need to attract people into social care. Now, most employers, I think these new proposals won't touch the sides because actually most employers, and the key thing is this, those protections are about unfair dismissal.

12:08It's not about fair dismissal. It's not about saying to somebody, if you're not up to the job, you can carry on working here, job for life, don't worry. It's about unfair dismissal. Now, most employers don't sack people unfairly. There's a small proportion that do. This gives workers, I think, much needed protections. Actually, what it also does is give them the confidence to come back into work. Because if you're on universal credit at the moment, making that transition into work can be scary. I think the provisions in the bill around day one employment rights, around things like default right to flexible working, will encourage more of those 900 ,000 people that we've lost since the pandemic who aren't in the labour market to come back into work.

12:47So as I say, for most decent employers, this won't touch the sides. There will be some employers who are at the sharp end of the labour market for whom this will present extra costs. And I'm sorry, that'll be the fact of life. It'll be a level playing field for every employer in this country and one that's better for workers, but I think better for decent employers as well. And maybe just make this point. We also at the TUC don't just talk to workers. We also talk to employers. And 70 % of employers that we surveyed, large, small, and medium, 1 ,000 employers, did a big survey with the IPPR, said they thought day one employment rights would actually help boost productivity.

13:20Similar proportion thought getting rid of zero-hours contracts was the right thing to do as well. So you have to disentangle. There are some very loud voices saying this will be the end of the world as we know it, and our business model couldn't possibly sustain it, I think most employers will just recognize, well, this will affect everybody. It'll affect every employer. We'll all be in the same boat and it will level the playing field for those who are ready to do the right thing. I mean, look, I tend to agree with you that over time you improve employee rights. It is a spur to the kind of investment that improves the productivity and living standards.

13:54So, I mean, this is not an argument that I disagree with. I am slightly concerned that the government didn't do a full cost-benefit analysis. You've seen the report of their sort of independent government body, which says, actually, this was all pushed through too fast and the cost may well turn out to be bigger. That just is a sort of point I would make about good government. You shouldn't rush big changes like this through until you've done all the analysis. But there is a separate point. Whether or not you think the government had an alternative tax-raising measure to employ a national insurance for a lot of services that vulnerable people depend on, whether it's hospices, whether it's social care, which we've just been talking about, the additional costs of paying this national insurance will threaten these absolutely vital services that these organizations are giving.

14:52And we haven't yet seen anything from the government to increase funding for palliative care, hospices, funding for social care at a time when social care provision in this country, as you yourself pointed out, is grossly inadequate. Yeah. Well, there's two separate points, isn't there, Robert? First of all, just on the impact assessments and the regulatory policy committee. I mean, actually, I would welcome further impact assessments of the employment rights bill. We published some research yesterday. I gave evidence, as I said, to the bill committee yesterday that we thought one of the things that was underplayed in the government's economic analysis was the benefits of the UK economy.

15:28They talked about, we think there will be benefits, improve productivity, reduced absenteeism, less industrial conflict. They didn't quantify them. We had a go at quantifying them on a very modest basis. We think it generates something like£13 billion net for the UK economy. We think that's really important. When you have more productive workplaces, when you have happier, better supported staff, when you reduce workplace conflict and you know that was something that the previous government was pretty poor at it actually has a positive impact on the UK economy. I absolutely get there's some of the concerns around social care and other providers I think the government is going to have to you know be clear about how it will support those people to deliver the services that are desperately required but fundamentally I think the Chancellor made the right choices in the budget.

16:10I think on national insurance it's worthwhile pointing out I mean the UK still will be well below the EU average in terms of social security contributions from employers. Overall in the whole tax take, the UK is towards the bottom end of the, you know, certainly below the average in the OECD. So again, I think this is about a useful readjustment in terms of the way that we tax employers in this country. I was really interested by what's been said this week in terms of, you know, getting economically inactive people into work. And, you know, the talk of, for example, job centres and things like that.

16:43it amazes me how shit job centres still are. And the fact that only now we're talking about a job centre in your pocket. It feels like we're really behind the times and finding a good way of getting people back into work and making it easy for them. I mean, it's also shocking. I think only one in six employers actually recruit. You've used a job centre. I'm going to declare an interest on job centres, two interests. One is that Alison McGovern, who's the minister who's taking it forward, is my local MP in Birkenhead. And I know she's done lots of work rethinking about how a job centre works. Second is that one of my kids, I won't go into too much detail because I'll embarrass them greatly, used to work very recently in our local job centre.

17:25And I can tell you the experience for the people coming into the job centre who are using the services poor, for the staff, really demotivating, dispiriting. You've got 10 minutes. So basically by the time you've done the identity checks and done the box ticking, you can't actually offer people proper support. So I absolutely think it is right to rethink the role of the job centre. I'm not going to wear my rose-tinted spectacles because job centres have never been great places. But when I was young growing up, you would quite often walk past the job centre and have a look at what jobs were available.

17:54And you might pop in and get the little card off and all the rest of it. Going to the job centre now is very much something that you're forced to do and it's a place of last resort. And so I think it is right for the government to think about, well, these should be places where you go at different stages in your working life. So actually, I'm looking not just for the first job, for the second job, the third job. What are the retraining opportunities? That might be in our existing job centres. It might be about bringing together local colleges, other sort of bits of support. But absolutely, I mean, I think having an employment support service that is genuinely about that, supporting people into employment.

18:28Of course, those who've got issues with drug and alcohol sort of addiction, that's one extreme. but you know for for my kids in their mid-20s where do you go to get advice about retraining mid-career uh no it's online it's not yet and that's where it should be like i do love your idea of like this kind of lifelong place we all go to but let's face it we do everything digitally now so i just to give you an example of something that's a friend of mine i won't go into too much detail but a friend of mine who's out of work has had 10 interviews in the past couple of months and has not got through any of them.

19:02And he's someone who's neurodiverse and he's just been left to kind of fend for himself. And he's someone who wants to work, but can't get a job. He really struggles with the interviews and it's really dispiriting because you're like, well, how do we help people like him who he's a bit scared of the job centre for all the reasons we've just described. And for him, it's a bit of a sensory overload as well, but he's had work, he's grafted and he really wants to carry on. Well, that's where I think the sort of face-to-face support in the job centre or, you know, as I say, in the local college could be really important.

19:32And actually, even under the previous government, we had a little bit of a taste of this. During the pandemic, job centres became much more flexible. We had large numbers of people, you know, accessing job centres who'd never had to access them before. And the support that was offered was much more flexible. So it's about, I need a laptop to be able to do the job. I need support to travel to the interview. I need, you know, a suit to go for the interview. I think the support was much more flexible and the government didn't learn the lessons from that. then I'm hoping that the work that Alison McGovern and Liz Kendall will sort of see this as genuinely, it's about supporting people.

20:06It's been about too much stick and not enough carrots, I think, in terms of supporting people into employment in this country. Yeah, because a lot of that work at the minute has been done by charities. Like, for example, I work with a charity called Smartworks, which basically provides clothes, particularly for women, trying to find work. And it is about the support around that. It's not just the clothes they get. And that's the reason they kind of come to the charity, but it is that holistic thing of just giving them that boost of going, you can do this. And, you know, after whether it's been, they've been not working because of looking after kids or health or whatever it is, it's terrible that it's charities having to do that, isn't it?

20:41And it's, that's not just part of our service. I mean, I think there will always be a role for those sort of charity organisations, but the state's got to step up to the plate as well. And sometimes it's the basics, isn't it? Just, it can be dispiriting when you go for that interview and you don't even get a response from an employer. and if you've done nine or ten of those interviews and you still get knocked back it's a bit like the motivation to do it i mean this is why it's ridiculous the idea that someone is going to spend 35 hours a week do nothing else but filling in job applications i don't think it's you know good for anybody's mental health i think it'd drive me spare after a couple of weeks and certainly if you've had rejection after rejection after rejection but but it then does go across to the other issues we were talking about in terms of job quality i mean i was an employer last week working with the union.

21:25One of the big issues they had was staff turnover 46 % a year. It costs them£4 ,500 to recruit every new starter. I mean, there's got to be something where, again, getting people into work is important. Keeping people in work and keeping them in good work, I think, is equally important. Paul, there's still lots more we want to ask you, but we'll have a quick break.

21:48do you think in terms of your values the government has got the balance or getting the balance right between carrot and stick when it comes to individuals who are out of work and need retraining or are being offered jobs they're being a bit if i'm honest i think a bit vague about so-called sanctions for people who won't take training or won't accept a job. What's your sense of where they're heading? There's one issue around young people. The Secretary of State, Liz Kendall, says there will be sanctions if young people don't take the opportunities that are on offer, but she won't say what they are.

22:28We've got this review coming, which will focus specifically on the 2.8 million people out of work because of disabilities of various sorts and again there's an issue around how much they'll be compelled back to work through benefit sanctions and how much it's going to be support what's your sense of where the government's heading i think the value's in the right place we're going to need to see the detail i particularly worry about the plans the government inherited from around work capability and that review next year absolutely we want to support and we represent hundreds of thousands of disabled workers we want to support those workers to to work and have rewarding jobs big issues around things like a disability pay gap.

23:05What we don't want people doing is being forced into employment and sometimes employment that's not appropriate because of the threat of benefit sanctions. On young people, I mean, it's interesting. If you think back to Gordon Brown's New Deal and the 97 Labour government, and then the future jobs fund that the government introduced immediately after the financial crash, there was always a degree of an offer to young people that was, it's training, it's work experience, it's paid work, but you can't say no to all of those options. And I think probably that's about right when you're 18 to 21. It's not a good thing to be out of work persistently.

23:40Because it is shocking that one in eight young people currently have no training, no work. It goes back a little bit, though, Robert, to what I was saying before, is that once you leave school, where is the support system? But also, and I bang on about this a lot, school doesn't prepare you for work. So you're asking a lot of an 18-year-old to suddenly understand the jobs market when they've never had any of it explained to them in their life. And particularly if they haven't got parents who necessarily are in a place or willing or able to support them effectively. And I found it difficult enough with, you know, I think I'm pretty switched on to what's happening in the world of work.