Employment Rights Bill

Committee (10th Day)

Clause 91: Labour market enforcement strategy

Amendment 271ZZA

271ZZA: Clause 91, page 110, line 12, at end insert— “with the three-year period resetting three months after any general election.”Member’s explanatory statement This amendment seeks to ensure that a new government would not be held to the labour market enforcement strategy of a predecessor government for up to three years.

My Lords, in moving Amendment 271ZZA, I will also speak to Amendments 274 and 278, standing in my name.

Clause 91 requires the Secretary of State to set out a plan for enforcing labour market legislation over a three-year period. However, as currently drafted, Clause 91 lacks the flexibility necessary to reflect changes in government and political leadership. As the Minister will be aware, Clause 91(1) places a statutory duty on the Secretary of State to publish a labour market enforcement strategy

“before the beginning of each relevant three-year period”.

Subsection (6) then defines those periods as

“beginning with the next 1 April after the day on which this section comes into force”

and every successive three years thereafter. At first glance, that may seem entirely sensible, but let me explain why it creates a democratic and practical problem that our amendment seeks to fix.

Suppose, for example, this Bill passes this year, in 2025. Under Clause 91(6)(a), the first strategy would need to be published before 1 April 2026 and it would then run until March 2029. Now, imagine a general election takes place in 2027—entirely plausible, perhaps even probable. That would mean that a new Government taking office in 2027 would be bound by a strategy formulated and published by a previous Administration, with potentially very different political priorities, until well into 2029. I suggest to the Government that this is neither democratic nor desirable.

Labour market enforcement is not a neutral administrative matter. It involves clear policy choices about which sectors to prioritise, what level of inspection and enforcement to undertake, what approach to take with non-compliant employers, and how to engage with trade unions, businesses, regulators and workers. These are not technocratic decisions. These are matters of political judgment. They ought to reflect the democratic mandate of the day.

It is not enough to assume that a single body will automatically deliver better outcomes than the existing regime. Enforcement is failing not because of institutional multiplicity alone. Each of the current bodies—the Gangmasters and Labour Abuse Authority, the Employment Agency Standards Inspectorate and HMRC’s minimum wage enforcement teams—serves a specific, differentiated role in a highly complex labour market. In some parts of the labour market—agriculture, construction, care work and logistics—a one-size-fits-all approach may not work. Moreover, there is the real risk that such a body could be driven by process rather than impact. We must not fall into the trap of building a body that spends more time chasing administrative infractions in compliant small businesses than confronting the deliberate, concealed exploitation of migrant workers, agency temps and casualised labourers. Overenforcement in the wrong places and underenforcement in the right ones would be a costly failure. This is a live risk, which is why a full independent review assessing enforcement effectiveness, the performance of existing bodies and the regulatory ecosystem they operate in is, in my view, indispensable. This matters particularly for smaller businesses that, unlike multinationals, lack the legal resources and dedicated compliance teams to navigate sudden changes in enforcement structures or protocols. Poorly targeted legislation, however well-intentioned, can fall hardest on these firms. We cannot afford to set up a system that should penalise the contentious but ends up penalising the conscientious while leaving the genuinely exploitative untouched.

Finally, we must recognise that a new labour market enforcement body will not operate in a vacuum. It will have to co-ordinate with the Health and Safety Executive, ACAS, local authorities, employment tribunals and various devolved institutions. If the new agency is established without proper integration planning, it risks creating confusion over jurisdiction, further delays in enforcement and diminished accountability. All these factors point to the same conclusion. Before Parliament approves such a substantial structural reform, we must understand exactly what we are doing, how much it will cost, what outcomes it will produce and what risks it entails. The public deserve no less. The labour market is too important, too foundational to fairness and dignity in this country for us to legislate blindly. What assurances can the Government offer that smaller, compliant businesses will not face disproportionate scrutiny while those engaged in serious abuse slip through the net? How will the Government ensure that the agency has the right balance of investigative power and sector-specific knowledge, rather than becoming a generic enforcement agency? I beg to move.

I support the lead amendment in this group in the name of my noble friend Lord Sharpe of Epsom to exempt a new Government, for up to three years, from the labour market enforcement strategy of their predecessor for the reasons set out so ably by my noble friend Lord Hunt. I also support Amendments 274 and 278 for a new clause after Clause 140 to review the effectiveness of enforcement and compliance with relevant labour market requirements as in Part 1 of Schedule 7 before the new agency is set up and for the costing of such a new body before it is set up.

The new fair work agency proposed by the Bill to bring together existing functions of enforcement is unknown territory. Today, to enforce a limited number of employment rights, official powers are used by four different agencies: the Gangmasters and Labour Abuse Authority, the Employment Agency Standards Inspectorate, HMRC and the Health and Safety Executive. The proposed new fair work agency bundles these—and new responsibilities under the Bill—into a single, untried and untested body. In general employers are quite familiar with HMRC and HSE, which provide advice as well as having enforcement functions. At the moment, we have the benefit of experienced bodies with whom employers are familiar and an ability by each body to be precise and knowledgeable about the subject on which it is an enforcement officer. We also have the advantage of different horses for different courses. Now, the plan is to move to an unknown, inexperienced entity with all the start-up costs that entails and without the precision focus which the present bodies have, because what is proposed is a one-size-fits-all model.

The enforcement of the laws will be differently framed with different aims by the current bodies. GLAA will have a different focus to that of HMRC, although some of the functions may overlap. I therefore suggest, in the interest of the taxpayer, that there is a need for a costing of the new body before it is set up and for a review of the effectiveness of the outcomes of present arrangements for enforcement and compliance to see how they stack up. This should be done before any steps are taken to put in place a new body. For these reasons, I heartily support Amendments 274 and 278.

My Lords, I wish to speak on the issue of the labour market enforcement strategy in support of Amendment 274 to which I have appended my name and to build on the excellent remarks of my noble friend Lord Hunt of Wirral and the specific points raised by my noble friend Lady Lawlor. For transparency, I declare that I have been a member of the Chartered Institute of Personnel and Development for more than 20 years. The CIPD estimates that the People Skills HR support service which it has mooted, working with ACAS, would cost about £13 million under the new regime when this Bill becomes an Act. We already know, following on from my noble friend’s comments, that the cumulative cost of the existing bodies doing similar work, with analogous workstreams, is about £40 million.

Amendment 274 is important because in this country we have a strange anomaly. Unusually for an advanced country, we generally do not put the architecture of scrutiny and oversight in primary legislation. I want to know how this agency is going to be accountable in terms of the costs, who it employs, its policies et cetera. No doubt the Minister will say, “Well, once it becomes an Act, there will be what was the Business Select Committee, or there might be the National Audit Office, or there might be the Public Accounts Committee”. But we are being asked to sign a blank cheque for this without knowing how precisely this agency is going to operate and, most fundamentally, at what cost. We have not seen a detailed impact assessment focusing on the work of this body. On that basis, I ask the Minister specifically how he sees the process of accountability working and whether there will be any work by his department, and Ministers more generally, to work out what the costs are likely to be.

I accept at face value that this Government are committed to reducing the regulatory burden, particularly on small and medium-sized enterprises. I am sure the noble Lord, Lord Leong, will bend the Minister’s ear on that, having come from the background that he came from as a champion of small businesses from the Labour side. It is therefore not unreasonable for us to ask what the cost will be and how we will be able to hold this agency to account once it is established.

My Lords, Amendments 277 and 328, which I expect the noble Lord, Lord Goddard of Stockport, to speak to shortly, are an interesting element. Amendment 277 talks about the review of the fair work agency. Considering that a number of questions have come up about this, that is a fair assessment, given that there is still a considerable amount of consultation to be done. Amendment 328 would basically strip out the commencement of any part of the Act until that review has been done and

“a Minister of the Crown has tabled a motion in both Houses of Parliament for debate … and the review has been approved by a resolution”—

not just regulations.

The reason I say this is that I continue to assert that some of the powers here are going to be novel. Even if the Equality Act 2006 may give powers to the EHRC, it has never used them to institute legal proceedings, only as an intervener or for judicial review, rather than taking on individual cases; I am conscious that there is a consultation there. The amendment from the Liberal Democrats is an interesting way to think about how we are looking at the details of what the new agency is going to do.

My Lords, before I begin my comments about the various amendments, I have news from afar. Councillor Fox—sorry, not councillor; that is going back a bit. My noble friend Lord Fox wants to pass on his thanks to Members of the House from all sides who have sent best wishes for a speedy recovery. I signed his card today from the Lib Dem group with the sentiment, “Don’t hurry back. I fully enjoy sitting until midnight doing the employment Bill on your behalf”—which I think, with my noble friend’s irony, he will get. His amendments would require detailed review of the fair work agency’s remit, funding powers and accountability structures, and parliamentary overview before commencement.

We are fairly neutral on Amendments 271ZZA, 274 and 278 from the noble Lord, Lord Sharpe, which aim at transparency and reviews. They are broadly procedural, but I have some sympathy with the noble Lord’s three-year review, which could be quite sensible. He explains those two amendments with clarity and brings out the blindingly obvious—the lack of cost and the lack of understanding of how this thing will be set up and work in reality.

I intend to ask the Minister some direct questions as well as supporting my noble friend Lord Fox’s amendments regarding the implementation plan, the opportunity for scrutiny and further consultation. First, I turn to what the noble Baroness, Lady Coffey, has been talking about, the fair work agency. We debated its creation and power across several earlier groups and I will not labour that point today, but I want to speak clearly in support of Amendments 277 and 328 tabled by my noble friend Lord Fox, and again place on record my regret that he is not able to be with us today. These amendments are central to establishing a credible and accountable agency. Amendment 277 would require a full review of the agency’s remit, powers, funding and relationship with other enforcement bodies, and would be subject to review, as the noble Lord has said. Amendment 328 would link the commencement of the Act to that process.

I would be grateful if the Minister would clarify the following points. Do the Government intend to publish a detailed implementation plan and, if so, when? Will there be an opportunity for Parliament to formally scrutinise that plan before the agency becomes operational? Do the Government anticipate a separate consultation on how the new powers will be exercised in practice? These are important questions not just for Parliament but for businesses, workers and enforcement bodies that will need to work with that agency and develop a strategy in a live environment. A stronger enforcement body is undoubtedly needed, but it needs to be under- pinned by clarity, accountability and proper scrutiny. My noble friend Lord Fox’s amendments offer a thoughtful and proportional framework to achieve that, and I commend them to the Committee.

My Lords, I thank the noble Lords, Lord Sharpe of Epsom and—in absentia—Lord Fox, for tabling Amendments 271ZZA, 274, 277, 278 and 328. Before I go any further, I think we all join the noble Lord, Lord Goddard, certainly from our Benches, in wishing the noble Lord, Lord Fox, the very best and speediest of recoveries. We hope to see him back in his place at the earliest opportunity.

I will speak first to Amendment 271ZZA moved by the noble Lord, Lord Sharpe of Epsom. This amendment is unnecessary, as Clause 91(3) provides full discretion for the Secretary of State to revise the labour market enforcement strategy at any time, including following a general election. That means that a new Government are not locked in. They can act swiftly, decisively and in line with their mandate. Were the party opposite to win power again sometime in the distant future, however difficult that is to imagine, its hands would not be tied by these proposals.

Of course, businesses, workers and enforcement bodies all benefit from clarity, consistency and strategic continuity. Automatically scrapping an enforcement strategy, just as the Government are finding their feet, risks creating exactly the kind of disruption we should be avoiding. To reassure the noble Lord, Lord Hunt of Wirral, the Bill is about strengthening our ability to tackle non-compliance and exploitation in the labour market, including, in the very worst cases, the scourge of modern slavery. The intention and mandate of the fair work agency are to catch the bad actors, not to trip up the good guys. This amendment risks instability rather than accountability.

Turning to Amendments 274, 277, 278 and 328 tabled by the noble Lords, Lord Sharpe of Epsom and Lord Fox, I want to be absolutely clear that the Government are committed to effective, transparent enforcement of workers’ rights. The creation of the fair work agency is a major step forward and we want to get it right, but these amendments are wholly unnecessary, duplicating myriad reports and recommendations over several years. By our count, there have been 33 government reports and strategies about the effectiveness of labour market enforcement over the past nine years. One could argue that this subject has been reported and scrutinised to death. The Director of Labour Market Enforcement produces an annual report and strategy that reviews the effectiveness of the labour market enforcement system. These documents are available in the Library of the House.

Just because one side of the House or the other—or, indeed, both—brought it in does not necessarily mean it is the right policy. Does the Minister not agree that, if we have a chance to review some of the weaknesses in inherited policy, it is a very good time to do it? The 2017 Taylor review, on which some of the then Government’s policy was based, focused particularly on the most vulnerable workers and certain categories. It was not a very wide focus.

We have had a fair amount of scrutiny of the wider proposal, rather than the Bill’s specific fair work agency proposals. As I said, over the past nine years since 2016, there have been 33 different strategies and reports, including—but certainly not limited to—the Taylor report. This is not an area that has not been considered and scrutinised to some degree. I also say to the noble Baroness that the Single Enforcement Body—as it was called by the previous Administration—was the policy of successive Conservative- led and Conservative Administrations. I am not going to intrude on the great policy disagreements on that side of the House. We feel it important to establish the fair work agency and to ensure that we have strong enforcement of labour market regulations. I therefore ask the noble Lord to withdraw Amendment 271ZZA.