Ian joins Shadow Chancellor in backing a worker-focused economic strategy

I joined the Shadow Chancellor John McDonnell in backing a worker-focused strategy for the growth and stabilisation of the UK economy.


The proposals were drafted by 15 leading labour lawyers and academics at the Institute of Employment Rights (IER), an independent think tank, in response to the Labour Party’s Agenda 2020 consultation. The consultation focused specifically on the urgent issues of:


  • boosting economic productivity

  • reducing inequality

  • fostering partnerships between employers, employees and government.



In its Manifesto for Labour Law, the IER proposes a labour model closer to that of the UK’s major European competitors, the majority of which negotiate wages and work conditions at a sectoral level through the process of collective bargaining between trades unions and employers’ federations. Collective bargaining coverage averages at 62% in Europe and rises to 80% among the strongest economies (Germany, Sweden, Norway and Denmark). It is estimated to have fallen below 20% in the UK, the second lowest in Europe. In the absence of collective bargaining wages and conditions are set by the employer unilaterally – save for the lowest paid who are protected by the minimum wage.


Much modern research has shown that high collective bargaining coverage diminishes inequality, boosts productivity and benefits the economy as a whole. Because of the decline in bargaining coverage, the UK is falling drastically behind countries with stronger industrial relations in terms of equality, productivity and efficiency. As importantly, collective bargaining is the only effective way in which workers have a voice in the determination of their wages and terms and conditions of employment.


Inequality, poor work conditions and low productivity


The UK is the most unequal country in Europe in terms of wage inequality. This income gap has been linked to widespread economic, health and social issues, including crime, drug abuse, mental illness, anti-social behaviour, and poor economic resilience on a national scale.


The average Briton works longer hours a day, more days a week, more years in their lifetime, and receives a lower pension when they retire than most of their European counterparts. In addition, they can expect lower levels of education and training; get fewer paid holidays; and lower compensation for redundancy, sick and parental leave. A greater proportion of them live in poverty, and the State is forced to subsidise their wages more so than anywhere else in Europe, putting strain on the public purse.


According to the latest Office for National Statistics figures, the productivity gap between the UK and comparable economies reached its widest point since records began in 2014, with output per hour now 18% lower in the UK than across the rest of the G7. Low productivity puts the UK at risk of slow growth and high inflation.



Generating a virtuous circle of growth

In order to restructure the economy in a similar vein to those of our European competitors, the authors’ key proposals are to:

  • reinstate a governmental Ministry of Labour to encourage and oversee collective bargaining

  • reinstate labour laws that promote collective bargaining

reverse over-regulation and unnecessary bureaucracy imposed on trade unions


Co-author Professor Keith Ewing, IER President and Professor of Public Law at King’s College London, explained:


“Policy over the last 35 years has focused on destroying collective bargaining, making it easier to hire and fire workers, provide them with insecure positions such as zero-hour contracts, and pay them low wages. This has led to a business model reliant on churning out low-quality services and products and disposing of, rather than training, existing staff. We know this reduces productivity in our economy, and low productivity leaves us vulnerable to financial collapse.


“In addition, competition based on cheap labour has disincentivised UK employers from investing in research and development to improve the quality of their output and efficiency of their processes; and from upskilling their workforce, which has led to a recruitment crisis.


“In 2013, nearly a quarter of vacancies were left unfilled due to a lack of appropriate skills in the available workforce. It should be a national priority to invest in our population. Most importantly, without collective bargaining there is no democracy at the workplace and workers are denied a voice in their own terms and conditions. Our international Treaty obligations require it and in this way we can promote better dialogue between workers and employers and untap the potential of our workforce,” he added.


Co-author John Hendy QC, Chair of the IER and a barrister at Old Square Chambers, added:


“The perception of trade unions in the UK has become largely separated from reality. Negatively slanted media stories have painted a picture of the labour movement as the enemy of economic resilience but from looking at the data and comparisons to similar economies, we know the opposite is true.


“Re-establishing widespread collective bargaining (required by international law) has been shown to raise wages, diminish inequality, and boost productivity. Workers with more spending power create demand for products and services, which fuels higher levels of employment.


“Promoting greater wealth and opportunity among those on lower incomes stimulates what we call a virtuous circle of growth, in contrast to today’s vicious circle of plummeting wages, low opportunity, and widening inequality.”


Shadow Chancellor, John McDonnell, said:


“The re-establishment of a Ministry of Labour will be of enormous benefit to employers as well as to workers; finally we can plan to produce the skilled workers that employers need, instead of leaving it to the market and poaching skilled workers from abroad. Likewise the authors are right to stress the benefits of extensive collective bargaining coverage in establishing democracy at work, diminishing inequality, increasing productivity and demand in the economy as benefits to us all: both Britain’s thousands of employers and its 31 million workers.


“We thank the Institute of Employment Rights for this important report and we will take their policy recommendations into account as we prepare our Manifesto for 2020.”


Ian Lavery, Shadow Minister for Trade Unions and Civil Society, said:

“As part of our Agenda 2020 consultation to develop policies for the next election, we identified the need for an industrial relations strategy as a key priority for the UK. We cannot compete in an increasingly complex global environment without fostering strong partnerships between the state, employers and the workforce. We must work together if we are to build a strong economy that is truly resilient and sustainable.

Historically, trade unions have played an essential role in bridging the gap between these stakeholders, and as such are best-placed to take a central position in future industrial relations strategies.

Our thanks go out to the Institute of Employment Rights for this vital report. It will be taken into account as the party prepares for 2020.


The authors also propose that individual employment rights such as those around access to justice should be reviewed to ensure workers do not face unnecessary barriers; criminal penalties should be introduced for unscrupulous activities such as blacklisting; and laws designed to prohibit strike action - for instance, permitting agency workers to be used as strike breakers - should be repealed.