Govt. must slash red tape to ensure job creation and growth

Prof Philip Booth calls for reform of the labour market

The government needs to free up labour markets and slash red tape if it is to help businesses thrive, said Prof Philip Booth, Editorial and Programmes Director at the Institute of Economic Affairs, in response to the news that the Prime Minister is to meet today with some of the UK’s biggest firms.

Six specific reforms should be considered:

- Lengthen the period of time before protection from unfair dismissal kicks in and lower the cap on compensation payable (currently around £70,000). Such moves would lower the amount of cases brought (57,000 last year), and reduce the risks to businesses of hiring new staff.

- Cap compensation for discrimination claims. It is an anomaly that unfair dismissal claims are subject to a cap but discrimination cases are not. Excessively high payouts in recent times demonstrate that something must be done.

- Introduce a fee for access to tribunals, payable should the case be successful. The actual amount can be debated, but introducing some kind of payment would stem the tide of speculative actions which are deeply damaging to small employers.

- Abolish the minimum wage. There is no EU requirement to have a minimum wage and it simply serves to increase unemployment by automatically pricing many workers out of the market.

- Move away from national pay scales in the public sector. These serve to distort the market and make it difficult for private businesses to create jobs in regions where the public sector dominates local employment markets.

- Review industrial action legislation to reduce union influence.

 

Prof Philip Booth said:

“Over-regulation and excessive red tape have made the labour market in this country inflexible. A labyrinthine network of rules and regulation has grown up that businesses must negotiate if they wish to hire new staff, and which lays them open to costly legal action should they wish to fire anyone.  

“If the government is to ensure growth and job-creation, it needs to enact specific reforms that will free-up businesses and give them more control over their own affairs. Small businesses, in particular, are hampered by current conditions as the burden of complying with these myriad rules and regulations are proportionally much more draining of their resources.

“There is much the government can do within the framework of the EU, and it needs to make this its priority if it is to get the economy back on track.”

 

To arrange an interview with Prof Philip Booth, IEA Editorial and Programme Director, please contact Ruth Porter, Communications Manager, 077 5171 7781, 020 7799 8900, rporter@iea.org.uk.

 

NOTES TO EDITORS

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.

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