Is the Employment Rights Bill a Hidden £5 B Burden?
When the Employment Rights Bill re‑enters Parliament, people worry about more than just new benefits.
The latest study from the Institute of Economic Affairs paints a stark picture: the bill could sneak in a £5 billion stealth tax that British workers will feel in their pocketbooks.
What the “Stealth Tax” Means
Short‑summed, the report says that every mandate built to “protect” employees is effectively a tax.
Instead of raising money for the government, politicians expect employers to absorb the cost.
The price? Lower wage up‑shifts for all workers.
Way too Many “Rights” for a Few
- Day‑one unfair dismissal protection
- Restrictions on zero‑hour contracts
- Bolstered union powers
Governments claim these measures help workers, but the analysis shows they’re a double‑edged sword: they make employers risk‑averse and slow hiring, stalling the very growth the policy promises.
Europe’s “Labour Freedom” Is in Decline
The study titled Liberating the Labour Market highlights how Britain’s labour‑market freedom dropped from 81 % two decades ago to just 63 % today.
That slip undermines an advantage once at the heart of the UK’s economic competitiveness.
Union Power – Not a New Age, but a Retro‑Party
New union provisions risk a 1970s‑style industrial militancy:
- Strikes become easier to organise
- Strikes can run for a full year without re‑vote
“The Bill makes it possible for unions to take the public through the wringer and extort more pay … from the government—i.e., the taxpayer,” warns Professor J.R. Shackleton.
To avert a runaway strike craze, other nations have gone full‑stop: Germany bars civil servants, university staff, many teachers from striking; the U.S. bars all federal employees.
Other Ideas Worth Practising in the Labour‑Free Zone
- Scrap the failed apprenticeship levy – it has cut apprenticeships since 2017, not raised them.
- Review occupational licensing – currently 20 % of jobs need government certification (estate agents, private detectives, social workers). The real issue is lobbying, not safety.
- Focus discrimination law on direct discrimination only – ditch the “equal‑value” tests that force warehouse workers to earn retail salaries.
- Introduce no‑fault dismissal with guaranteed compensation – replace a complex tribunal system that sees 25,000 unfair dismissal claims a year with a streamlined process.
- Link university funding to graduate outcomes – tie a school’s income to the employability of its graduates, giving institutions a stake in real job success.
Professor Shackleton’s Take
“Politicians love to announce new employment ‘rights’ because they think employers pay the bill – but that’s an illusion,” he says.
“Every mandate, from parental leave to holiday entitlements, acts like a stealth tax that gets passed back to workers through smaller pay rises than they would otherwise receive. The only difference is that no money is raised for the Exchequer.”
“The Employment Rights Bill will make this much worse, imposing billions in hidden costs that workers will ultimately bear themselves. The Government is not protecting workers – it is harming them and undermining its own alleged number one priority to boost economic growth.”
