Angela Rayner’s staff’ rights bonanza ‘will hammer jobs market and the financial system’, watchdog warns

Angela Rayner‘s workers’ rights bonanza is likely to damage the jobs market and the economy, the powerful public finances watchdog has warned.

In a blow to Labour’s deputy leader, the Office for Budget Responsibility said it did not have enough detail about her Employment Rights Bill to deliver a full verdict on its consequences.

But it said it expected her flagship law to be bad news for firms – raising the prospect that its final judgment at the next Budget could blow another hole in the Chancellor’s desperate efforts to balance the books.

It comes after the Government’s own impact assessment admitted the introduction of sweeping rights for staff – including the ability to sue bosses on day one and restrictions on zero-hours contracts, as well as the repeal of Tory-era anti-strike laws – will likely cost businesses £5 billion a year.

The OBR said in its Economic and Fiscal Outlook published alongside yesterday’s Spring Statement: ‘We are yet to reflect the impact of the Government’s Employment Rights Bill (ERB) in the forecast.

‘While the ERB outlines the key policy intentions set out in the Government’s Plan to Make Work Pay, and gives the Government powers to implement additional legislation, there is not yet sufficient detail or clarity about final policy parameters to allow us to robustly assess the economic and fiscal impacts.’

Angela Rayner’s (pictured) workers’ rights bonanza is likely to damage the jobs market and the economy, the powerful public finances watchdog has warned

In a blow to Labour’s deputy leader, the Office for Budget Responsibility said it did not have enough detail about her Employment Rights Bill to deliver a full verdict on its consequences (stock)

But the OBR added: ‘Employment regulation policies that affect the flexibility of businesses and labour markets or the quantity and quality of work will likely have material, and probably net negative, economic impacts on employment, prices, and productivity.

‘Given these potentially significant impacts, we will incorporate a central estimate of the aggregate impacts of the policy package in our next forecast.’

The OBR also said Rachel Reeves’ controversial increase to employers’ National Insurance contributions (NICs) last autumn, which kicks in next week, is likely to be causing bosses to lay off staff. 

It said some surveys already ‘point to a substantial reduction in nominal wages relative to what would otherwise have occurred’, but others suggest the result of the added costs will be ‘higher prices’ for consumers.

Federation of Small Businesses policy chairman Tina McKenzie said: ‘Many small employers are worried about next month’s rise in employer NICs.

‘The Government needs to listen to the feedback from business on the Employment Rights Bill and change the elements which are most likely to act as a deterrent to job creation.’

Britain’s Chancellor of the Exchequer Rachel Reeves (pictured) leaves 11 Downing Street, in central London, on March 26, 2025, to present her Spring Budget Statement at the House of Commons

It also emerged yesterday that a quango created as part of Labour’s workers’ rights revolution will be able to raid homes and seize laptops. Enforcement officers for the Fair Work Agency will have powers comparable with the police, The Times revealed.

Shadow business secretary Andrew Griffith said: ‘Labour’s employment Bill is the first in history to do the opposite of what it says on the tin. 

‘It will suppress salaries, cost jobs and unleash waves of strikes. Amid businesses warning of 300,000 potential job losses, Labour must stop dodging scrutiny. They need to come clean about the true impact of their extreme union charter.’