CIPD Podcast 39 - Pre-election special

Date: 02/02/10 Duration: 00:29:45

In this podcast Lord Young, Jonathan Djanogly and John Thurso, representatives from the Labour, Conservative and Liberal Democrat parties, discuss workplace policy, regulation and people management


Philippa Lamb : Hello and welcome to the CIPD podcast. This month we’re focusing on some of the election issues that business in particular will be keeping a close eye on over the coming months.
With me to discuss these I’m delighted to welcome Labour’s Employment Relations Minister, Lord Tony Young, from the Conservative Party Shadow Business Minister, Jonathan Djanogly and the Shadow Business Secretary from the Lib Dems, John Thurso; thanks very much indeed for joining us today. 

Now, the General Election this year obviously comes in the depths of a recession, you’ve all worked in business at some point I believe and obviously all the political parties have had a lot to say about the urgent need to support business and encourage growth; Jonathan Djanogly, what sort of fist due you think the current administration is making of that at the moment?

Jonathan Djanogly: Well pretty poor. The situation at the moment is one of huge Government debt; if we’re going to get our economy back on its feet reducing the deficit has got to be the priority. 
If we don’t have confidence in our economy coming back from the markets then business is not going to have the confidence to move forward either. So, we can’t look at business or indeed employment in isolation, it’s part of the wider economy and the picture is not a happy one, which is why we’re saying that the priority is going to be to sort out the economy, to get on top of the deficit, to reduce the amount of regulation and to get taxes lower for business so that they can start employing people again.

PL: John Thurso, you’ve had a long career in the private sector, how well do you think the current Government understands the needs of business?
John Thurso: I actually think the Government have made a reasonable fist of dealing with the crisis. I think it would have been very difficult to imagine a different course of action in regard to the banks and how they set about restoring some measure of fiscal stability. Where I think you can lay a great deal of blame at this Government’s door is having got us into this mess in the first place and I also think that there is a severe question mark over their seriousness with dealing with the deficit. 
The Pre-Budget Report calls for a halving of the deficit over a four year period but there is absolutely no detail on how that will be done and I go with the Governor of The Bank of England, who made it clear that you don’t have to rush into reducing the deficit immediately but what business needs is a very clear understanding of whatever way Government is going to actually achieve the reduction: that’s what’s missing at the moment. 

PL: Lord Young, do you want to respond to that?
Lord Tony Young: In one way I would agree with John, I think that we’ve taken, by common consent around the world, the right measures to ensure that we get out of the recession as quickly as possible. Where I disagree with John is that he takes no account of the fact that this was a global recession. If we start to cut deficit too soon the sort of delicate green shoots that are there by common consent, we’re not actually (if you don’t mind me saying so) in the depths of the recession, we’re actually about to come out of it and that’s what all the figures are showing us. We’ve got to nurture that. 

I would say that in the Pre-Budget Report, the Chancellor’s got it right. Most of the commentators agree that the trick now is, yes, we’ve got to create confidence, yes, we’ve got to indicate that we’re going to treat debt reduction seriously but we need to do it at the right time. We have indicated that we’re going to take strong action on things like public sector pay, we’ve indicated that there are going to be significant cuts and reductions and I think you will see that in the budget as well. You might argue about how much flesh there is on the bones but we understand the need to address the deficit but what we’re saying is: at the moment what’s the primary task to ensure that we don’t choke off this recovery, that we maintain employment at the highest possible level.

PL: We’ve got this planned rise in employers National Insurance contributions; it’s not a popular move is it?

Lord Young: No, well we still think that the overall package of taxation for employment is one of the lowest. In fact, if we look at the World Bank assessment of business, we’re fifth in the world. 
We’re doing an awful lot to encourage growth in business, whether it’s the money that we’re putting into training, which makes a huge contribution, all the measures we’ve taken to stimulate growth, whether it’s been the reduction in VAT, whether it’s been car scrapage, which I have to say to you were of course opposed by certainly the Conservatives, actually played their part in recovery so you can’t have it both ways. 
If we’re saying that we need to do something about reducing deficit, we think this is a reasonable, fairly cautious move. It’s not coming in, anyway, immediately, it’s not coming in (I think I’ve got it right) until about 2011 so again we’re pacing it. 
In terms of affecting people it’s not going to impact the vast majority of those who are earning below £20,000 won’t be affected anyway so it’s a small increase.

PL: Pulling this back to the kind of day to day issues facing the business community, when the recurring gripe we always hear is about red tape isn’t it and compliance, would you say that we have now seen – looking at it with the benefit of hindsight – too much legislation in favour of employees rather than employers?

Lord Young: Well this is a balance that we’ve got to get right here and we think we have got it right, the balance. We’ve got significant programmes to reduce red tape, something like three billion to date. We’ve got a planned programme to reduce another six billion of red tape and regulation between now and 2015. Every time we look at introducing new legislation, which is often, about giving fair rights for workers or it might be on the question of safety etc, we do look very carefully at the impact on business, which is why for instance, if you looked at the Agency Workers’ Directive we didn’t go for day one we’ve gone for a 12 week qualifying period, we haven’t gone for introducing it too soon, we’re giving business time to prepare so we believe we’ve got a balanced approach. It is about recognising that whatever we do in terms of legislation and regulation we look at the impact carefully, we consult and, as I say, you look at the overall assessment of what it’s like to operate as a business.

PL: I suspect that Jonathan Djanogly would disagree with much of that.

JD: Yes, there was quite a lot there actually. Well, let’s take taxation first. Cutting corporate taxes will be the priority in terms of tax measures for the next Conservative Government, we want to reduce corporation tax at both the higher rate and for small businesses; we want to reverse Labour’s National Insurance increases which we see as a direct tax on jobs and will reduce jobs.

PL: You’re talking about a contributions holiday aren’t you, for new jobs?

JD: On top of that, on top of the reverse - indeed. 
As far as red tape is concerned we are very concerned at the some 20 Acts of Parliament and 200 Statutory Instruments that this Government has introduced directly increasing employment legislation and creating an atmosphere where businesses, particularly small businesses, no longer want to employ people.

PL: Yes, would you like to be specific about which bits of the employment legislation you’d like to see repealed?

JD: Well let me give you one example. We’re getting a lot of businesses coming to us and saying that when staff take them to employment tribunals rather than contesting the cases, even when they believe they have a valid defence, they will simply settle. They won’t settle for any reasons to do with the merits of the case, they will settle because they can’t afford the cost of the process and into the case of small businesses they can’t afford to take the time out to actually go and deal with the process and we feel that the rights of the employees and the way that tribunals work it’s gone too far against the interests of business and does need to be readdressed. 
I would also say on The Agency Workers’ Directive, which was specifically referred to by Lord Young, that we joined the Government for six years in Europe in stopping this directive go through, the Government conceded because of huge trade union pressure that was put on them. We think that was an absolutely wrong decision. This single regulation is going to put some £40bn of cost onto business over a ten year period at a time when we’re desperately trying to come out of a recession and it was a huge mistake.

PL: John Thurso?

JT: Can I take taxation first of all? We approach taxation from a completely different angle I think to either of the other two parties and believe that the tax system is inherently unfair and that over the last ten years/15 years the poor have basically got poorer and the rich and have got richer. The burden of tax is falling harder on people on lower incomes and we want to see people up to £10,000 pay no tax at all and Vince Cable has put together an extremely well costed thorough package which shows how that can be done, largely through taking away reliefs such as the upper rate relief on pension contributions. We think that that’s a much fairer and much more balanced way to approach it and gives people at the bottom end of the scale a real opportunity to manage their own money in their own pocket rather than get it via various credits and I think that’s a very important differential.
We would like to see the greater corporation tax go down. It’s interesting that if you look at the FTSE250 the 28% headline rate, the actual average tax rate of the FTSE250 is 21.5%, now it seems to me rather stupid that you have a tax rate which nobody pays except a few people and therefore we would like to see a system where the headline rate comes down, the allowances go away and you therefore have a much closer relationship between the tax paid. We would certainly not put the tax up at the small business rate, that is really silly, and we dislike what was done with NIC. 
Turning to regulation, it always struck me that there are two things here, the first is impact assessments. At the moment every department does an impact assessment statement which is never then again checked.  The net result is that you can put anything you like in an impact assessment, they’re not really terribly realistic and they all basically say there’s not going to be an impact. HMRC, internally for a number of years, have actually been doing an audit of the impact assessment of their regulations and it has been very helpful to HMRC in actually improving their regulatory ability and I want to see that audit extended to all regulation, so that whoever is writing the regulation, be it minister or civil servant, they know that the NAO will be checking up what they said and I think that would be a tremendous benefit.
The second thing is that I always found it’s not so much having a regulation it is the way in which the bureaucracy of the regulation impacts on business and as well as looking at whether we regulate or not, it is actually the rules that come from the regulation and the paperwork that’s got to be filled in. We all know you’re not allowed to murder somebody but there are no regulations about how we shouldn’t not murder anybody, we all know we’ve got to have health and safety but there’s a whole culture grown up, which the people who are true health and safety professionals deprecate. There’s a whole culture grown up that is not actually health and safety it’s a kind of consultancy round it and that’s what we’ve got to tackle and get rid of is the bureaucracy as much as individual regulation.

PL: I want to move onto flexible working.
Lord Young: Well before we do move on I would say if I may.....

PL: Briefly if you would.....
Lord Young: Look before we make wild allegations about £40bn on Agency Workers’ let me remind you this is the same party that promised us that if we introduced a national minimum wage we’d lose millions of jobs but I just remind you of that and that was A Fair Deal For Workers that helped to take people out of poverty and so I just put a question mark against that, those kind of allegations. It’s not true that the impact assessments are just dreamed up by Government departments and they’ve got no validity whatsoever.

PL: Well I don’t think that’s what John Thurso said is it?

Lord Young: Well it did imply somehow that they were, you know we just do them and then... 

JT: They’re not hugely robust.
Lord Young: Well I would dispute that.

PL: Okay, point taken, you’re in disagreement about this.
I would like to move on because we’ve got a lot of territory to cover. 
Let me drag you back to flexible working because it does seem to me the phrase ‘family friendly’ is rather looking to be in danger of becoming a bit of a buzz word in this election already, the ' election' as we’ve seen in the papers recently. 
At present employees with young children, under 16, can request to work flexibly; should everyone have that right? 
Lord Young, Harriet Harman’s been talking about this, it’s gone a bit quiet lately hasn’t it.

Lord Young: Well, you know, we always seem to want to put a negative rather than look at the positive if you like and the positive thing is really about ensuring that we enable mothers in particular, we’ve done a huge amount on things like maternity leave, we’ve extended the length of maternity leave, we’ve introduced paternity leave, we’re now going to introduce legislation so that they’ve got the ability to share that if they think and families think that’s appropriate.

PL: What about the age limit, will you push it out to 18?
Lord Young: I’m not sure about that one, eh no. What point I want to make is that somehow we put ‘family friendly’ as though it’s a negative thing. The reality is that when you as an employer have invested a lot of money in somebody, you’ve trained them, they’re doing a good job for you, there’s a mutual benefit. Mothers want to come back to work, want to continue their career but need a career break, they need support in childcare, they need improved child benefit and those are the things that we’ve introduced so yes we have had family friendly policies and we believe they have benefitted employees, employers and the economy as a whole.

PL: Jonathan Djanogly I think the Conservatives are saying they will push the age limit out to 18, is that right?

JD: Yeah that is correct. I mean, the reality of modern day living is that for families now, both parents are going to work and we simply appreciate that working practices must reflect society and that’s going to mean over the next ten years that more women will become the main breadwinner and employment laws must reflect that.  So we are pushing this agenda quite hard both in terms of parental leave, flexible working and I think in terms of employment law as a whole the buzz word for us at the next election will be flexible working. Flexibility I have to say for employees but also flexibility for employers because the two are going to have to be matched up. So, for instance, if we look at flexible working one of the implications of that is going to be that companies will need to have more access to agency and temporary workers to make up for the fact that people are taking time off work because of flexible hours, which is why we’re so concerned at things like The Agency Workers’ Directive because that shows the Government is not looking at this area holistically. It’s not just looking at one side of the coin you have to look at the whole lot.

PL: Okay, John Thurso, the Lib Dems want to go a lot further on the issue of parents and parental leave don’t you and particularly in maternity and paternity leave.

JT: Absolutely but we see the changes that are happening in society, we see the need to ensure that the work place is balanced with the way peoples lifestyles are developing and we see this as a very positive way forward. The one caveat that I would put on it is that it is very important to ensure that the scale of a business is taken into account and one of the things that we certainly understand is that what you can do in a large professional firm of four or five hundred people and what you can do in a small business of four people, is often very different and in common with many countries throughout Europe, we see it’s important to make a legal distinction between the SME sector and the rest of the employment landscape.

PL: Yeah, I mean this is a strong point isn’t it, because, I mean, although all the party websites have good stuff to say about equality for women and you’ve all reiterated this morning, I mean there is an argument for saying (but particularly with small employers) even the maternity rights that women have currently have made them less employable.

JT: That is an argument, I’m not sure I follow that argument. I think maternity rights for women...If you were drawing up, starting from scratch with ‘a list’ of rights to give you’d probably put maternity rights for women at the top, I think it is one of the absolutely most vital and in a society where women now are working at least equally and, as Jonathan said, very often are the main breadwinner, to not have that right just seriously impairs, in my judgement, the start of that important relationship between mother and child.
There’s a whole raft of other areas and when I used to run a business in France, it was very interesting that the social legislation was clearly divided; with a legal definition of an SME as being 49 or fewer employees and all sorts of things from works’ committees to union legislation kicked in when you had 50 employees. Now I’m not saying that 50’s the right number for the UK but I think the principle of understanding that the small business has more difficulty in meeting a mandatory legislative process but also by its very nature in that if there are four of you in a business you tend to know each other very well, you’re probably in a small community, you actually do it informally and by different ways. It’s just to recognise that that difference between the larger company which can well afford to structure itself and gain the benefit and the smaller company which can’t is a very important distinction to make.

PL: Jonathan Djanogly, good idea?

JD: Well we’re actually coming to the flexibility debate from a slightly different angle. The position that John gave is similar to the Government’s position mainly looking at the woman’s position. We’re trying to be more open about it and realising that working arrangements may be different between families and therefore in some cases it may be the man who wants to stay at home rather than the woman. From our point of view we’ll be looking at time that can be taken out but that time can be shared more equally between the man and the woman.

PL: The take up on paternity leave has been very low hasn’t it?

JD: It has been, but that’s... 

PL: Why would that be any different?

JD: We’re not saying the man has to take it up, it could be the woman, but we just want to introduce flexibility between the couples so that they can work it out depending on their arrangements.
Lord Young: Well I must say well we’ve already done it, you know it’s nice to know that..
PL: Would you agree?
Lord Young: Of course we agree but it’s nice to know that the Conservatives are catching up. Of course we understand the point about SMEs, which is why we’ve paid such a lot of attention in helping them with specialised training etc, we understand that and we’re careful the way we frame legislation but if we’re talking about seriously recognising the nature of families is very very different and that’s why we’re somewhat puzzled about the Conservative Party’s commitment to married tax breaks when we’ve got so many different family arrangements. If we’re serious about flexible working, as this Government is, we’ve demonstrated our commitment to that. 
You’re right about the take up of paternity leave, again we’re trying to advertise that, we’re trying to say to people look here’s your opportunity, if in this case the mother in the family is the more significant wage-earner then here’s your opportunity on... 

PL: But you’re not looking to push out the paternity leave allocation are you?
Lord Young: Well, but they can share in it so if the mother decides to return to work, then that amount of paid leave can be used by the father, so it is a significant step forward.

LP: Can we talk about productivity, which kinds of plays into the same area? I mean we’re all familiar with the statistics about how unproductive the UK remains compared to other major economies. 
Poor management is often cited as the key problem isn’t it?  Realistically, what can any Government do about that?

Lord Young: Well, again, I think that training is vitally important. We’ve still got a third of companies in the UK that actually don’t train at all, somehow believe that as I’ve described it in privacy that they can defy the force of gravity when we’re telling them that they’re 2.5 times more likely to fail if they don’t during a recession. We’ve invested a huge amount in the Train To Gain programme, it’s a popular programme, we’ve tailored specifically to small and medium sized companies, we’ve tailored bite-sized courses – this is a demand led programme – and then more recently, actually with The Chartered Institute as one of our... people we’ve engaged, we’ve stressed the importance of employee engagement. We’ve said there’s huge gains on productivity to be made by that so that’s a really positive agenda and if we can persuade employers to recognise that if their employees are fully engaged, if they recognise that they are a part of a team, if they recognise that their contribution is valued, sick leave will reduce, absenteeism, turnover reduces so there’s very big gains; we’re talking billions here.

PL: Jonathan Djanogly, it seems that this is a bit of a problem area for the Conservatives isn’t it because you don’t want to see more regulation loaded onto the business community even if the intention is to raise productivity so do you feel that this is not an issue for you?

JD: Well I mean, you know, ultimately Government’s not going to manage the managers, managers have to manage so all Government can do is try and create the business conditions where managers feel that they can expand their businesses and move productivity forward and in that regard Lord Young brought up a very important issue, which is Government’s attitude towards training. Last year the Government cut its apprentices by over 30%, this is an area which at a time of recession we should be significantly expanding and will be a priority issue for the next Conservative Government.

PL: As a former apprentice yourself, Lord Young... 

Lord Young: Well....

PL: ...what do you say about that?
Lord Young: That’s what I call chutzpah!  
When we inherited the apprenticeship I would liken it if it was a National Health patient it was dying. We only had 65,000 and just over a quarter completed their apprenticeships. Last year we had a quarter of a million apprenticeships and well over two thirds we’ve carried on. 
We’re investing a billion a year in apprenticeships, we’ve talked about high level apprenticeships; another twenty thousand we’re committed to through public procurement. Here’s a bit of, if you like, a bit of regulation I’d be interested to see. We made it absolutely clear to contractors if you want to bid for a Government contract you have to specify how many apprenticeships and what training you will do, that’s a bit of regulation but it’s a bit of much needed regulation so to say that we cut apprenticeships it beggars belief. We are still advancing on apprenticeships and I can tell you this as well that when the figures are announced soon we’ll be able to tell you that just over 70% will be completing apprenticeships. I make this challenge now, if the Tories could beat that in a future record I would be fascinated – their record on apprenticeships is abysmal.

PL: I want to leave that there because I want to ask John Thurso about this because I know you’ve got strong views about the importance of HR and management.

JT: Absolutely and funnily enough listening to this lovely little internal spat between the Conservatives and Labour about apprenticeships when you asked them a question about management that absolutely encapsulates the nub of the problem. 
The core question you asked about productivity, there are two sides to it. One is investment, British industry has traditionally been under invested and there is certainly something that Government can always do to provide the best background for making investment. But, I think the most important thing is our culture of leadership and management and one of the big impacts of the financial crisis is that it has highlighted the stupidity of having one industry based in London which has sucked so much brainpower and talent into it, namely financial services, and we have to reverse that and we have to get good people out into industry and we have to underline that management skills and leadership skills are not some second rate sort of dirty little thing that goes on in a corner, they are the core to our economy and we have to really concentrate on getting sound quality management throughout industry and commerce. When we do that we will start to see that flow through in all the other areas. I mean I couldn’t agree more with both of the other two about the importance of training, I mean I hate the fact that the hotel/catering training levy board was abolished, I think there’s a lot in the old levy board system – which is not party policy, this is my personal view – but the absolutely critical point, quite apart from skills training and apprenticeships and all the rest of it, is actually to get a much greater appreciation, in Britain, of the role of the manager and how the manager actually makes things happen and that’s the core and the nub of the whole question. 

PL: And there is a lot more that I’d like to discuss but I’m afraid we are pretty pushed for time. I’ve two final questions and if I may I woud like to ask you for a yes or a no on them both. The first, should the minimum wage be increased in 2010? John Thurso, yes or no?

JT: Yes by an indexed amount.

PL: Lord Young?

Lord Young: Yes.

PL: Jonathan Djanogly? 

JD: Let’s see what the Low Pay Commission says first. 

PL: Well that brings me to my next question; should there be a HighPay Commission?

JD: No. 

PL: Lord Young?
Lord Young: Um... 

PL: A bit of a tricky one for you this isn’t it? 

Lord Young: I think no, on balance.

PL: Do you back benchers agree with you? 

Lord Young: Well because you’ve asked for a yes no let’s make it difficult. 

PL: Yes I’m sorry I shouldn’t have given you that subsidiary question.
Lord Young: In truth, it’s worth it and it’s worth the debate, yeah.

PL: John Thurso? 

JT: No for the one word answer but if you ask me the Chancellor already is one. 

PL: I’m afraid that really is all we have time for, thank you all very much indeed.

If you’d like to find out more about today’s guests, or indeed the CIPD’s own election manifesto, you’ll find more details in the accompanying show notes, that’s 
My thanks to the Minister, Lord Young; to Jonathan Djanogly and to John Thurso for sharing their thoughts today.
Join us next time; we’ll be discussing how to build a truly authentic organisation. Until then, goodbye. 


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