The think tank behind Sir Keir Starmer’s campaign for the Labour leadership is canvassing support among MPs for incendiary proposals to scrap Angela Rayner’s workers’ rights agenda.
An unpublished paper by Labour Together, leaked to The Times, criticises the Employment Rights Bill — which will become law in January — as a “safety blanket” that “saps dynamism” from the economy and has left the government’s economic agenda “going backwards”.
It calls on the government to embrace “easy firing” and ditch 80 per cent of Rayner’s regulations on business, instead introducing higher taxes on firms and workers to fund a new scheme of unemployment insurance for those laid off.
The plans, which were circulated among Labour MPs this week, are the most explicit criticism of Rayner’s agenda from within the party to date. They are likely to be highly controversial and could draw a new dividing line between would-be contenders for the Labour leadership.
• The Times View: Employment Rights Bill is a blow to businesses and jobseekers
Labour Together said new business taxes designed to fund six months of unemployment payments worth 80 per cent of a worker’s last salary would cost firms less than complying with the Employment Rights Bill, which passed its final stage in the Lords on Tuesday.
The paper states that the government should “scrap 80 per cent of the Employment Rights Bill and buildout unemployment insurance”. It adds: “This could be funded by higher taxes on employers (cheaper than the compliance cost of ERB) and small contributions from workers.”
Stressing that Britain must take advantage of its “agility and openness” and double down on its economic strengths, it also argues that the government should aim to have “the most flexible markets” of economic superpowers such as the US and China.
“Countries that make it easiest for companies to restructure their operations are also those that do the most R&D in frontier sectors like biotech,” Labour Together’s paper reads. “And easy firing means easy hiring, which benefits both firms and workers.”
While explicitly rejecting “laissez-faire economics”, the text also says that new technology makes the “creative destruction” of job losses inevitable, adding: “The government has started to make our land market more flexible with planning reform, and to strengthen our capital markets. There is much more to do. And it is going backwards on labour market regulation with the Employment Rights Bill.”
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It adds that unemployment insurance would help laid-off workers see new technology as “an opportunity, not a threat”.
The paper also suggests ending all capital spending in the southeast of England, a proposal that has enraged Labour MPs in the region, and a new deregulation drive in the water, energy and digital sectors.
It is the second eye-catching intervention from the think tank, whose advisory board includes the New Labour grandees Baroness Morgan of Huyton and Alan Milburn, this month.
Last week, The Times revealed that Labour Together was surveying party members on their preferred candidates for a leadership election, a move that was met with shock and anger among allies of the prime minister — whose own 2020 campaign to succeed Jeremy Corbyn was masterminded by the group, which was then led by Morgan McSweeney.
Its new suggestions for the government’s economic agenda explicitly cite Tony Blair’s government as an inspiration. The paper, The brave churn of technology — a political economy for Labour in the 21st century, is not attributed to a named authored but opens with the words: “Tony Blair was right.”
It goes on: “Technological change, like globalisation in the 2000s, is the defining fact of our age. For both our prosperity and safety, the UK needs to be at the frontier of the revolutions in AI, robotics, biotech, energy and other technologies.
“Our project must be to harness these revolutions, not slow or stop them. Our old growth model is gone. We need to find a new one.”
The paper also calls on the government to “throw the might of the state” behind the Oxford-Cambridge corridor, with the aim of tripling its size with new housebuilding and commercial development, increasing state spending on research and development to the 1 per cent of GDP spent in South Korea and Germany, and divert more government resources to developing the economies of Birmingham, Leeds, Manchester and Liverpool, which would be given greater power to raise their own taxes.
The southeast of England should “pay for its own stuff” the think tank says
GETTY
The paper also sets out plans for the southeast of England to “pay for its own stuff” and lose Treasury funding for new infrastructure projects. “It is rich enough to pay for its own projects or get private sector investment,” it reads. “We just need to give it the tools to do so. That includes the ability to vary and borrow against local taxes, as well as setting up development corporations that can compulsory purchase land at cheap prices.
“Whitehall should spend every penny of its national capital budget on projects outside the southeast.”
Labour Together’s most eye-catching suggestions are unlikely to be heeded by the current government, however — though Pat McFadden, the work and pensions secretary, has suggested that workers who have just lost their jobs should be eligible for bigger welfare payments than the long-term unemployed.
On Wednesday, Starmer heralded Rayner’s employment legislation as “the biggest upgrade to working people’s rights in a generation” and said: “I couldn’t be prouder to lead the government that made this happen.” Any leadership candidate that did adopt the policy would likely face a fierce backlash from the party’s soft left, as well as the former deputy prime minister herself.
A spokesman for Labour Together said: “Labour Together totally supports this week’s Employment Rights Act. This paper was a provocation for private discussion about how to build a political economy centred on technological change and innovation. It looks beyond current policy, exploring ideas for spreading innovation and investment outside the South East and how to support workers through technological change with a bigger welfare state rather than regulation alone.
“But given the welfare state we inherited from the Conservatives, that is far away. The Employment Rights Act is the best way to give workers much more security now.”