Lord Vaux of Harrowden (CB)

My Lords, we now come to the general subject of unfair dismissal rights from day one, which we have just touched on in relation to apprentices. Many of the same arguments are going to apply more widely. For me, this is most damaging part of the Bill because the unintended, but well understood, consequence is that it will damage the life chances of the young and the most vulnerable. I thank the Ministers for their time last week; I am not sure if I persuaded them, but I will try again now. At Second Reading, I asked why these changes are required. What is the evidence that there is a genuine problem, or that the qualifying period of two years is being abused in any material way? The Minister did not answer the question, so I have therefore given notice that I intend to oppose the question that Clause 23 and Schedule 3 stand part of the Bill, so that I can probe further into what problem these changes are intended to solve. Rather than hearing my views on the subject, I am going to tell noble Lords what the Government’s views are, and what they think the impacts of these changes to the qualifying period will be. According to the impact assessment, “it is likely employers will make changes to hiring, dismissal and management practises to minimise the risk of litigation for dismissal and minimise unproductive employee-job matches. The burden of these changes could be in the hundreds of millions per year”. It goes on to say: “The impact on businesses is expected to be negative and driven by familiarisation costs, and administrative costs from providing a written reason for dismissal, as well as the costs associated with additional early conciliation and tribunal cases, which is also likely to create additional burdens for the Employment Tribunal system”. So, the Government agree that there will be a substantial cost to business, an increase in litigation risks and additional burdens on the tribunal system. They also state that these impacts will fall disproportionately on smaller businesses. I assume that nobody in this Chamber thinks that any of those are a good thing. More importantly, what are the impacts on employees, especially those who are trying to find work? The impact assessment is pretty clear on that too. It says that “there is some evidence of a negative relationship between stronger dismissal protections and hiring rates … this suggests that if not implemented with care ‘Making Unfair Dismissal a Day One Right’ could damage the employment prospects of people who are trying to re-enter the labour market, especially if they are observed to be riskier to hire (e.g., younger workers with less experience, ex-offenders, etc.)”. It later says that “there is evidence that the policy could negatively impact on hiring rates. For example, employers may be slower to take on workers due to the liability and increased protections, particularly for those that are seen as riskier hires”. Again, I cannot believe anyone thinks those are good things. The Government accept that this policy will create costs in the hundreds of millions for businesses, add burdens to the already stretched tribunal system and, most importantly, damage the hiring prospects—the life chances—of the very people we should be helping to get into employment. I hate the term NEETs, but we have heard a number of comments about the nearly 1 million young people who want to get into work. It goes directly against the Government’s admirable policy to get people off welfare and into work. So, why do this? Surely there must be some hard evidence that the current two-year qualifying period is causing some genuine problems, or evidence of material abuse, to justify these changes that will have all the damaging consequences that the Government themselves accept. However, the impact assessment makes no such claims. It provides no evidence whatever that there is a problem. It simply makes a number of very vague and unquantified statements about people benefiting from increased job security. For example, it suggests a direct benefit to households driven by the welfare benefit arising from increased job security, with absolutely no attempt to quantify it. It also goes on to say that there are benefits from “additional settlements and awards from additional early conciliation and employment tribunals”. That last one really is extraordinary. This Bill has been described as a bonanza for employment lawyers; the Government appear to be confirming that, and actually seem to be suggesting that it is a good thing. To read or listen to what the Government say, noble Lords would be forgiven for understanding that there are currently no protections from unfair dismissal for employees during the qualifying two-year period. That is quite wrong. There is a whole list of reasons for dismissal that are automatically unfair from day one. I will give a few examples, rather than go through the whole list—I do not want to keep everyone here all night. They include dismissal for reasons of a protected characteristic, such as age, disability, race or religion, et cetera; for being pregnant or on maternity leave; for being a trade union member or representative; for taking part in industrial action; and for being involved in whistleblowing. There are many others. So, let us stop this idea that new employees are unprotected from day one. It is just not true. I ask the Minister, as I did at Second Reading, when she did not answer: why are the Government doing this? What evidence do they have that the qualifying period is really a problem? Presumably, there must be some tangible benefits from the policy to justify all these disadvantages that the Government have described. What are they? The amendments in the name of the noble Lords, Lord Sharpe and Lord Hunt—and happy birthday to him—would require impact assessments of the changes, which I support, but surely it would be better to get this right in the first place. The impact assessment does say: “The impact of hiring and labour mobility will ultimately depend on the final regulations on what is permissible in the ‘initial statutory period’ of employment”. That is absolutely right, and that is what the rest of this group tries to deal with: to reduce the negative impacts of this change. Paragraph 3 of Schedule 3 says that the Secretary of State may make regulations about dismissal during the initial period of employment, which is generally called a probationary period. My Amendment 104, along with Amendment 334, is intended to make it a requirement that the Secretary of State “must” make, rather than “may” make, such regulations. I thank the noble Lord, Lord Morse, for his support on this and other amendments. He sends his apologies that he is unable to be here tonight. As the Bill stands, the two-year qualifying period can be abolished and not replaced with anything. I understand that is not the Government’s intention, and we heard earlier about the nine-month preference, but it is what the Bill says. Having no probationary period at all would be extremely damaging, so it is important that it should become a requirement that these regulations are issued, and not just a “may”. My Amendment 108 would ensure that any probationary period is at least nine months long. What is important is that the employer should have adequate time to assess whether the new employee is right for the business, including by giving them a good chance to get up to speed through training and so on. I agree that the current two-year period is very long, and from discussions I have had with business groups and from my own experience in business, I am confident that the shorter period would be acceptable to most businesses. I think the Government’s suggestion of nine months is workable, and that is what I have proposed in the amendment, so I hope it is not particularly controversial from that point of view. The other critical factor for a probationary period is that it must work in a way that enables an employer to give the person the benefit of the doubt, rather than acting as a disincentive to hire them, especially for the riskier hires that the Government described and that I mentioned earlier. For that to be the case, it is essential that the employer can dismiss them without having to give a reason during the probationary period.