By Len Shackleton
The Employment Rights Bill returning to parliament today (Monday 14th July) will impose a £5 billion stealth tax on British workers, according to a new report published by the Institute of Economic Affairs. The analysis warns that employment mandates, sold as helping workers, really function like hidden taxes that reduce their wages over time. Professor J.R. Shackleton, the report’s author, argues that politicians exploit public misunderstanding about who really pays for employment rights. They often only benefit certain groups, but the costs are passed back to all employees through lower wage increases than they would otherwise receive. The Employment Rights Bill’s measures – including day-one unfair dismissal rights, restrictions on zero-hours contracts, and enhanced union powers – will also make employers more risk-averse in hiring decisions. This will put a brake on the growth the government seeks to achieve. The report, Liberating the Labour Market, reveals how Britain’s labour market freedom score has already plummeted from 81% on the Heritage Foundation’s Economic Freedom Index 20 years ago to just 63% today, undermining what was previously a key competitive advantage for the UK economy. In addition, Shackleton warns that new union powers could trigger a return to 1970s-style industrial militancy, allowing unions to “put the public through the wringer” and “extort more pay from the government – which means, of course, the taxpayer.” The Bill makes strike ballots easier to organise and extends strike mandates to a full year without re-voting. To prevent this scenario, the report suggests Britain could eventually have to follow international examples by banning strikes in essential services. Germany bans civil servants, university staff and many teachers from striking, while the US prohibits all federal employees from taking industrial action. Other key reform options to liberalise the labour market include:
Professor Shackleton, Editorial and Research Fellow at the Institute of Economic Affairs and Professor of Economics at the University of Buckingham, said: “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.” 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. |