Starmer refuses to tear up workers’ rights bill as compromises loom

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Sir Keir Starmer is resisting pressure from business and some within his own party to tear up a new workers’ rights bill, even as government officials conceded that details of the policy were still up for grabs.

The prime minister’s allies told the Financial Times he was fully committed to the “make work pay” plan, which is seen in Number 10 as essential to tackling low pay, improving insecure employment and raising productivity even though it is expected to cost businesses £5bn. 

But senior Labour figures argue it may have to be made more business-friendly in the coming weeks.

“It needs serious tooth removal,” said one Labour official close to Starmer. Another influential adviser said: “There is a view in the Treasury and DBT [business and trade department] that this shouldn’t upset the growth apple cart too much.”

The workers’ rights package was a key promise in Labour’s manifesto, but business leaders have warned that piling even more costs on to companies will imperil the growth ambitions that Starmer and chancellor Rachel Reeves have set out as their core mission for the government.

Starmer insisted in the House of Commons this week he would not abandon the principles of the legislation. “We believe in giving people proper dignity and protection at work,” he said, calling the bill “good for working people and good for the economy”.

One Starmer aide said: “We want the economy to grow and are prepared to take on the political fights to get that, but we also want some of the proceeds of growth to flow into the pockets of workers, especially tackling low pay and insecure employment.”

The aide added: “We have consulted on the application of how we do that. So the measures may adjust to reflect that policy objective, but they will not limit our ambitions.”

Ministers are consulting businesses, unions and others on details of the Employment Rights bill, which is due to report to the House of Commons before Easter, in an increasingly tense political atmosphere. 

Businesses are already smarting from last year’s tax-raising Budget and a hike in the minimum wage that comes into force this April, while companies such as J Sainsbury and Airbus have already blamed higher costs for recent job cuts in the UK.

Nicola Smith, director of policy at the Trades Union Congress, said she believed ministers had strengthened their commitment to some parts of the bill, including a near-ban on employers using “fire and rehire” tactics to impose changes in contracts, which the legislation will allow only where a business is close to insolvency.

“From where I’m sitting, we don’t see any change of ambition,” she added.

The proposals in the controversial package include scaling back zero-hours contracts and giving staff full rights of redress from their first day of employment.

Conservative leader Kemi Badenoch this week branded it the “unemployment bill” and called on Starmer to ditch the entire package.

One imminent compromise will see ministers address concerns that employers could find themselves in endless consultation with unions over unconnected redundancies at different sites under the legislation as currently drafted.

At present, they are required to consult only when they make 20 or more workers redundant at a single site. 

Ministers have said they will bring forward amendments to the bill at the next stage of the parliamentary process — and both business and unions believe the timing of this next stage could slip into March. 

Craig Beaumont of the Federation of Small Businesses said two areas of focus for business lobbyists were around the proposals for day one protection against unfair dismissal, and the mechanism of the proposed “ban” on exploitative zero and low hour contracts. However, he acknowledged the FSB was “pitching for the stars” in urging ministers to change the day one right to a protection that kicked in after a year. 

Angela Rayner, deputy prime minister and champion of the bill, has told colleagues that the idea of improving workers’ rights is one of the Labour government’s few popular policies, and a key weapon in the party’s fight against Reform UK in working class seats.

“The government is committed to implementing day one rights, ending insecurity, and strengthening the voice of working people,” said one ally of Rayner.