|
In today’s newsletter:
Scaremongering on the Employment Rights Bill
The 2025 Nanny State Index
Economic growth!
and more….
Last week the Attorney General, Lord Hermer, delivered a speech on the Government’s Employment Rights Bill. In it he accused the Institute of Economic Affairs of "scaremongering" for claiming the Bill will undermine growth and harm the very workers it seeks to protect. Of course, the IEA never seeks to scaremonger, only to make robust arguments based on the evidence. So let’s take a look at that evidence.
Firstly, the official impact assessment estimates costs of £5bn annually from the Employment Rights Bill. But who will pay these costs? The evidence shows that it is highly likely to be significantly, if not totally, passed on to workers through lower wages. In addition, the burden of the extra regulation will be felt much worse by smaller businesses than big corporates. The Government admits this, acknowledging “costs will be proportionately higher for small and micro businesses due to the fixed costs of admin and compliance burdens”. So far, not so good.
What’s worse, the £5bn government cost estimate is likely to drastically underestimate the full extent of the costs of the new rules, as our own Len Shackleton has pointed out. It focuses mainly on admin burdens, failing to calculate the impacts on hiring costs and other business decisions. For example, there is no calculation of the impact of limiting zero-hours contracts or day-one rights to unfair dismissal protection, nor any assessment of the costs of lowering the barriers to strike action brought about by the Bill’s provisions for Unions.
So we know there are costs that will fall on workers and small businesses, on top of further costs to the wider economy from the as yet un-measured impact on business decisions. Labour market statistics this week show falling employment. It is no surprise that businesses are making cuts ahead of both this Bill and the tax rises on employment coming into effect.
But the Government tells us they’ve listened to the feedback from businesses. But have they? The five biggest business groups in the UK have written an open letter calling for urgent changes to the Bill, that are yet to transpire. They said it would "damage growth and employment, undermining the government's own goals". Does the Attorney General think they are scaremongering too?
The UK has a serious productivity problem, there is no doubt. Fixing this problem is vital to improving our growth rates. According to Hermer, the Employment Rights Bill will increase productivity. The logic for this appears to be that improving worker wellbeing will improve productivity, but truth is that there is not sufficient evidence to measure the ‘the increases in wellbeing and health from better working conditions [or] the knock-on impacts on productivity which would benefit businesses’ - from the Government’s own economic analysis, again.
It may be argued that giving workers a 'voice' reduces turnover and absenteeism, which may increase productivity, reduce costs of recruitment and encourage businesses to invest more and offer more. On the other hand, unions may resist the adoption of new technology, insist on overstaffing – such as guards on local trains - and oppose performance-related pay or promotion structures emphasising competence rather than time served. Evidence suggests that the overall impacts are an adverse effect on productivity in the UK. For more on this, read Len Shackleton’s book Unions Resurgent.
So, at best there is an assertion and a hope that the Bill will be a boon to productivity, and therefore growth. But the facts point in the opposite direction. The Employment Rights Bill will mount costs on the businesses that drive growth, which will ultimately be paid by the workers it seeks to help, either through lower wages or fewer job opportunities.
The Government is right to identify growth as their priority, but they won't find the solution in this Bill.
Callum Price
Director of Communications
P.S. The best way to never miss out on IEA work, get access to exclusive content, and support our research and educational programmes is to become a paid IEA Insider. For a limited time only, new paid subscribers will receive a copy of Dr Steve Davies’ book Apocalypse Next: The Economics of Global Catastrophic Risks for free.
Offer ends on the 31st of May!
IEA Podcast: Director of Communications Callum Price, Communications Manager Reem Ibrahim, and Editorial Director Kristian Niemietz discuss the new growth figures, Sadiq Khan’s plan to build on the green belt, and the Nanny State Index, IEA YouTube
The 2025 Nanny State Index
 |
The UK is now the 7th worst place in Europe to eat, drink, smoke and vape, up from 11th place in the 2023 edition of the Nanny State Index.
Freedom in the UK has decreased at a faster rate than almost anywhere else in Europe over the past two years.
Germany, Luxembourg and several southern European nations remain the most liberal environments for consumers, while Turkey, Lithuania and Finland continue to top the table for state paternalism.
What has pushed the UK higher up the Nanny State Index?
Very high tobacco duty – the UK has the second highest taxes on cigarettes when adjusted for income
Tax on sugary drinks
Punitive alcohol duty - the UK has the fourth highest taxes on alcohol when adjusted for income
Indoor smoking ban – including in all pubs and restaurants, and inside vehicles with children
Plain packaging and a retail display ban for tobacco products
New restrictions on product placement for ‘less healthy’ foods
Minimum unit alcohol pricing (Scotland and Wales)
Communications Manager Reem Ibrahim interviews Head of Lifestyle Economics Christopher Snowdon, IEA YouTube
Which European country has the largest nanny state?, The Spectator
 |
UK soars up new 'nanny state' rankings league - Germany is bottom, The Express
Freedoms in Britain declining at a faster rate, The Daily Mail
 |
UK Now Officially One of The Biggest Nanny States in Europe, Guido Fawkes
 |
UK has one Europe’s biggest nanny states, CityAM
News and Views
Should the UK strike a new trade deal with the EU?, Editorial Director Dr Kristian Niemietz in the Daily Express
 |
Pension funds ‘volunteer’ to invest £25bn more in UK assets, Executive Director Tom Clougherty quoted in The Times
Tom Clougherty, executive director of the Institute of Economic Affairs, a free-market think tank, said: “I am very nervous about the government getting involved in asset-allocation decisions.
“When it comes to getting more investment in UK assets, the government’s focus should be on making us a more attractive investment proposition through tax and regulatory reform that puts economic growth first.”
Now we know: Streeting’s NHS ‘reforms’ were just one big lie, Public Policy Fellow Matthew Lesh, The Telegraph
The Real Reason Britain Is Poorer Than America's Poorest State, Communications Manager Reem Ibrahim interviews President & COO of the Mississippi Center for Public Policy Douglas Carswell, IEA YouTube
Rachel Reeves put UK on life support – now Angela Rayner will pull the plug, Editorial and Research Fellow Professor Len Shackleton quoted in the Daily Express
“We have to fundamentally reform the health service”, Communications Manager Reem Ibrahim appeared on Channel 5
 |
Labour to hand NHS bosses £30k bonuses to cut waiting lists, Editorial Director Dr Kristian Niemietz quoted in the Telegraph
Dr Kristian Niemietz, the editorial director and head of political economy at the Institute of Economic Affairs think tank, said there was “nothing wrong with the principle”, but the problem was that “what counts as ‘good performance’ is decided by politicians, not patients”.
He added: “There is, in reality, no objective metric for overall performance. If a healthcare provider cuts their waiting times, but if this comes at the expense of clinical outcomes or patient experience – is that an improvement or not?
“In the private sector, but also in more market-based healthcare systems, it is in every provider’s own best interest to work out what their customers want, and how best to deliver that. This simple but effective mechanism cannot be replaced by politically determined performance schemes.”
David Friedman Explains Why Trump's Tariffs Will Fail, Executive Director Tom Clougherty interviews Economist David Friedman, IEA YouTube
EVENT: In Conversation with the Rt Hon Robert Jenrick MP | ||||||
| ||||||
 | ||||||
We are delighted to invite our paid Insider subscribers to an upcoming IEA event, ‘In Conversation with The Rt Hon Robert Jenrick MP’. | ||||||
|
EVENT: Dr. Yaron Brook on the Morality of Capitalism | ||||||
| ||||||
 | ||||||
We are delighted to invite our paid Insider subscribers to an upcoming IEA event, ‘Discussion with Dr Yaron Brook on the Morality of Capitalism’. | ||||||
|
You’re currently a free subscriber to Insider. For the full experience, upgrade your subscription.
Paid subscribers support the IEA's charitable mission and receive special invites to exclusive events, including the thought-provoking IEA Book Club.
We are offering all new subscribers a special offer. For a limited time only, you will receive 15% off and a complimentary copy of Dr Stephen Davies’ latest book, Apocalypse Next: The Economics of Global Catastrophic Risks.
| ||||||||||
