Labour's 1970s employment rights bill could send Britain over the edge

Telegraph

16 hours ago

Rachel Reeves made vast spending pledges last week in a bid to placate fellow ministers, Labour MPs and party activists and save her political skin. She made no effort whatsoever to explain how she will pay.
Yes, this was the Chancellor's spending review. We will get more detail on taxation and borrowing, the other side of the Government's ledger, during her next annual Budget, expected in late October or early November.
Given how borrowing has ramped up over recent months, though – with debt interest payments surging as gilt yields have soared – it's astonishing that Reeves said absolutely nothing to reassure financial markets during her House of Commons speech.
Back in March 2024, the Office for Budget Responsibility (OBR) forecasted borrowing for the financial year from April 2024 to April 2025 of £87bn.
After the first Labour budget in 14 years last October – during which Reeves increased borrowing and taxation by a combined £70bn, green-lighting hefty public sector pay deals, net zero projects and much else on her party's ideological wish-list – the year's borrowing forecast ballooned to £127.5bn.
Spool forward to the March Spring Statement and estimated 2024-25 borrowing was up another £10bn, to £137.3bn. And by the time the financial year ended a month later, the total had surged again to £148.3bn, a rise in our national debt in a single year more than £60bn up on the forecast Labour inherited on entering government last July.
Reeves claims endlessly to have 'discovered a £22bn black hole in the public finances left by the Tories' on taking office. This is fictitious nonsense, used by ministers to justify tax rises not mentioned in Labour's election manifesto. But even if you accept this rhetorical tosh, which I don't, the £60bn-plus rise in borrowing in 2024-25 alone is almost three times bigger.
The more Reeves drones on about 'the black hole we inherited', as she did yet again at the top of her speech last Wednesday, the more she undermines her fast-diminishing credibility in the eyes of financial markets. That's yet another thing she simply can't afford.
Before last October's budget, the 30-year gilt yield – the rate of interest charged by investors to lend the UK government long-term money – was about 4.35pc. Yields in recent weeks have moved in a range of 5.25-5.5pc, having been above the 4.85pc peak during the height of the 'Liz Truss mini-Budget crisis' for the whole of this year.
Yes, sovereign bonds yields have risen in other highly-indebted Western nations since last autumn. But 30-year yields in France, Germany and Italy are all considerably lower and have gone up far less (by less than half a percentage point in each case).
Plus, about a quarter of the UK's sovereign debt is index-linked, far more than other G7 economies, which makes us uniquely vulnerable, with debt-service costs spiralling rapidly upward as inflationary pressures rise.
After what shadow chancellor Mel Stride rightly called a 'spend now, tax later' spending review, we're now in for 'a cruel summer of speculation'.
Cash-strapped companies and households will now angst about yet more Labour tax rises in this autumn's Budget. The fine print of last week's Treasury documents shows Reeves's plans are predicated on council tax in England rising by 5pc every year during the rest of this Parliament.
The only way the UK can avoid a really serious fiscal crisis is to get economic growth going on – with more consumption and investment driving tax receipts up and a larger economy then more able to shoulder our huge national debt stock.
Yet the day after Reeves's statement came news the economy shrank 0.3pc during April – the first monthly drop in headline GDP for six months and the worst single month since October 2023.
Labour's 25pc rise in employer national insurance contributions (NIC), implemented from April, has seriously hammered hiring.
Provisional data shows payroll employment fell by a vast 109,000 in May alone, with employment having fallen every single month since this ill-judged NIC rise was announced last October.
And now, just as we really need to get people back to work, to kick-start growth, Labour's employment rights bill is set to clear Parliament.
Deeply counterproductive, this legislation takes the UK back to the 1970s by significantly increasing trade union influence, a sure-fire route to stagnation.
Championed by 'Red Queen' Angela Rayner, the Deputy Prime Minister, this bill removes qualifying periods for sick pay, maternity pay and unfair dismissal, granting all of these from day one of employment.
No wonder countless employer surveys point to fears of lawsuits and greater reluctance to take on more staff.
The legislation repeals plenty of the trade union controls from the early-and mid-1980s onwards that rescued Britain from the dystopian and destructive industrial relations of my childhood.
The 50pc threshold for strike ballots is set to go, along with vital minimum service levels during industrial action, handing ever more bargaining power to Labour's trade union paymasters.
Creating new finger-pointing quangos to chide employers, and requirements for companies to implement endless 'equality action plans', there are also insidious 'opt out' clauses designed to maximise worker contributions to unions and therefore the Labour party, with scant disclosure.
It is yet another example of how the Government is determined to replace enterprise, prosperity and opportunity with regulation, entitlement and state overreach.
I'm amazed this ghastly legislation has attracted so little media attention. It must be vigorously opposed and called out by the leadership of both the Tories and Reform, the only two parties likely to acknowledge the dangers.
Because unless the economy gets going, and the UK escapes this low-growth, high-borrowing, high-tax doom loop, we're heading for a serious fiscal crisis.