Angela Rayner’s workers’ rights bonanza will cost businesses up to £5 billion a year, the Government has admitted.
The Deputy Prime Minister insisted her reforms were ‘pro-business’ and ‘pro-growth’, and herald a ‘new era for working people’.
But she faced a backlash from Conservatives in the Commons after official impact assessments laid bare the staggering cost of more than 70 new measures aimed at improving conditions for employees and boosting trade union power.
An economic analysis of the Employment Rights Bill revealed that ‘delivering those benefits will place a direct cost on employers’, with the ‘maximum likely cost’ estimated at up to £5 billion annually.
The costs will be ‘proportionately higher for small and micro businesses’, while the impact on economic growth will be ‘small’. There could be a 15 per cent increase in workplace disputes from the new employment rights while bosses may become ‘less willing to hire workers’.
Angela Rayner faced a backlash in the Commons over her proposed overhaul of workers’ rights, which the Government has admitted could cost business up to £5 billion a year
The new legislation will hand more power to trade unions, making it easier to stage walkouts (file photo)
Shadow business secretary Kevin Hollinrake said the new law would fall ‘most heavily on small businesses, for whom the measures could be existential’
The proposals are now being stewarded by Business Secretary Jonathan Reynolds (pictured)
And reducing the barriers for strikes ‘could result in increased industrial action’ if relations between businesses and unions do not improve as hoped.
Ms Rayner was asked by Tory MP James Wild: ‘How does loading costs on to employers help boost growth and job creation?’ She replied: ‘The impact assessment also makes clear that it would have a positive impact on growth and more than 10 million workers will benefit from Labour’s plan in every corner of this country.’
Tory business spokesman Kevin Hollinrake, who co-founded an estate agents in 1992, said: ‘The question I ask myself now is when this legislation is in place, would I start that small business again today? Sadly, the answer would probably be no, certainly not one that employed any people.
‘That is because the very high costs of these measures will be borne by all companies, which will then be passed on in the form of higher prices, reduced wages and lost jobs. They will fall most heavily on small businesses, for whom these measures could be existential.’
The Department for Business and Trade claimed 10 million will benefit from the plans, with those in the worst-paid and least-secure jobs getting a cash boost of up to £600 a year. Under the reforms, millions of staff will get the right to sue their bosses on their first day in a new job – as well as taking unpaid parental leave – while anyone who falls ill will be entitled to claim sick pay immediately rather than from the fourth day.
The so-called ‘impact assessment’ for the Employments Rights Bill has been released ahead of a debate and vote by MPs later
It is the first time the government has produced any estimated costs for the controversial measures
There have been warnings that the Employment Rights Bill championed by Angela Rayner (pictured left) and Jonathan Reynolds (right) will result in a ‘tsunami of flawed regulation’
Businesses are to be warned that Labour’s workers’ rights overhaul will mean more strikes and hinder investment (file image of City of London workers)
It will become more difficult for bosses to turn down requests for flexible working, while those on ‘zero-hours contracts’ will get guaranteed hours.
The department also published 24 separate documents setting out the likely impact of the huge changes. Its 107-page economic analysis said the reforms will increase ‘fairness and equality across Britain’ by helping workers who are trapped in insecure jobs, face discrimination or are at the mercy of unscrupulous bosses. Improved wellbeing could be worth ‘billions of pounds a year’ if fewer days are lost to stress or depression.
But the impact assessments also set out in detail the burden on businesses of each measure and admitted businesses will ‘look to pass on costs to consumers (in the form of higher prices) and/or workers (in the form of lower wages or worse terms and conditions)’.
The impact assessment lays out the estimated costs to business
The analysis stated: ‘To deliver those benefits, there will be a direct cost on employers. At this stage, we believe the cost to business would be in the low billions of pounds a year (i.e. less than £5 billion per year).’
If they cannot absorb costs by cutting investment or reducing training they may resort to ‘reducing employees’.
Tina McKenzie, of the Federation of Small Businesses, said: ‘Ms Reeves has a big opportunity at the Budget next week to demonstrate that Labour is on our side’.