A change in the law to protect workers is urgently needed
Labour’s pledge to strengthen workers’ rights and clean up corporate governance will bring businesses into line with modern working practice, writes Rachel Reeves
Labour’s historical role is to be the party of the labour interest. To stand for the common good and to redress the power of capital. Our party’s approach to business should retain this ethos; taking a lead to protect ordinary people and hold corporate power to account; encouraging responsible businesses while clamping down on rogue firms that don’t play by the rules.
As chair of the Business, Energy and Industrial Strategy Select Committee, I have tried to expose some of the most egregious examples of corporate misbehaviour, from the collapse of Carillion and rocketing CEO pay and gender-pay inequality, to the wild west operations of some of the players in the modern gig economy, such as Uber and Deliveroo.
Carillion was a glaring example of corporate failure, a disaster for all those who lost their jobs and the small businesses, contractors and suppliers left fighting for survival. Carillion’s delusional directors, pocketing hefty pay packets along the way and driving Carillion off a cliff, looked to blame everyone but themselves. But Carillion does not stand alone. Its collapse highlighted a creaking regime of corporate accountability in the UK and a glaring absence of regulators ready to challenge and act upon bad business practices. It also laid bare a belief in some parts of the corporate world that, when all is said and done, the British taxpayer will step in and pick up the pieces for business failure.
Carillion highlighted once again the UK’s slide into crony capitalism. Carillion were, by no means, the only outsourcing company to establish themselves as corporate partners of the state, as they avoided market competition while their directors enriched themselves on a steady flow of taxpayer-guaranteed revenue. As a bare minimum, the government needs to look again at how the state procures public services and construction projects and ensure there is a genuine commitment to engaging smaller businesses, on fair terms, in these activities.
Carillion also highlighted the need for reform of the audit industry. KPMG’s long and complacent tenure at Carillion was not an isolated failure. KPMG, PwC, Deloitte and EY pocket millions of pounds for their lucrative audit and consulting work – even when they fail to warn about corporate disasters like Carillion. When investors are losing faith in the accounts, there’s a woeful lack of meaningful competition, and consulting and auditing relationships are far too comfortable for the public or investors to expect any real challenge, then it is clear that a shake-up of the ‘big four’ is long overdue.
But every day we see big businesses abusing their market dominance, not least in the emerging gig economy. More needs to be done to protect working people. When the PM launched Matthew Taylor’s Employment Practices in the Modern Economy report on the gig economy and workers’ rights, she said: “We will always be on the side of hard workers and good employers.” Yet well over a year since the Taylor report was published, the government has failed to turn these words into action, leaving workers at the mercy of bad employers, while good employers endure a competitive disadvantage to unscrupulous businesses who don’t pay holiday leave, sick pay, NI and more.
The flurry of employment tribunals and court cases brought by workers and their trade unions on bogus self-employment over recent months show that a change in the law to protect workers is urgently needed. Uber, Hermes, CitySprint, Pimlico Plumbers and Addison Lee have all been found to have been bogusly labelling their workers as self-employed to dodge granting the employment rights their staff should be entitled to, as well as short-changing the Treasury in lost NI contributions.
The Business, Energy and Industrial Strategy joined with the Work and Pensions Committee to recommend a way forward, producing a draft bill which would strengthen workers’ rights and help put an end to abuses of the law.
Similarly, as a committee we have made recommendations to clean up corporate governance. We cannot rely on a vague hope that unscrupulous businesses will start to treat their workers fairly or that auditors will provide a spotlight into the real health of our PLCs. Instead, we must strengthen the law in favour of responsible businesses, and the government now needs to get on with it.
Rachel Reeves is Labour MP for Leeds West and chair of the Business, Energy and Industrial Strategy Select Committee
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