Businesses’ hopes are growing that the flagship package of employment rights championed by Angela Rayner will be diluted following her downfall after Labour figures claimed discussions had already begun in Downing Street.
People familiar with the situation told the Financial Times that the legislation was vulnerable now that the former deputy prime minister, its key champion, has left power — setting up a potential battle with leftwingers and unions.
Rayner, who is close to trade union leaders, was the most heavyweight cabinet figure to back the reforms to employment law.
The bill is one of the centrepieces of the government’s agenda, cracking down on practices such as zero-hours contracts and “fire and rehire”. But it has caused concern among business leaders who say it will create new costs and risks, on top of recent tax and minimum wage increases.
The government’s own impact assessment suggested it would impose £5bn annual costs on the corporate world.
One senior Labour figure said some people who work in Number 10 were trying to “kill” key parts of the bill, “having spotted Angela’s difficulties”.
“There’s a huge amount that is still to be determined through SIs [statutory instruments] and [House of] Lords concessions but it’s a widely held conversation that is taking place in No10,” the senior Labour figure said. “I know for certain this conversation has taken place in multiple meetings . . . Angela fought incredibly hard to offer no concessions whatsoever.”
Another government figure involved in the legislation said that it was likely to be watered down now its leading advocate was out of the picture.
Downing Street refused to comment.
Any rowing back on the package will enrage trade union leaders, who gather in Brighton on Sunday for their annual Congress. Paul Nowak, general secretary of the Trades Union Congress, said that “we expect the government to deliver this bill in full”.
While the legislation is close to completing its passage through parliament, many of the fine details will only subsequently be thrashed out through a series of consultations and secondary legislation.
The next opportunity to make changes will come in a week’s time, when MPs consider amendments made in the House of Lords before the summer recess.
The Lords voted through amendments to two central elements of the package. One of these would replace the new right to protection against unfair dismissal from the first day of employment — a totemic measure as far as unions are concerned — with protection that kicks in after six months.
The other would weaken the planned ban on zero-hours contracts, replacing an obligation to offer workers a guaranteed number of hours with an obligation to grant it if requested.
Until now, ministers have been adamant that they plan to overturn the Lords’ amendments.
Nowak said Starmer had given his wholehearted backing to the bill at a TUC parliamentary reception earlier this week.
“He rightly stressed that it will give workers stronger rights not just for this parliament but for generations to come,” he said. “That’s what the public wants and that’s what the government has promised . . . there is nothing to gain from watering down this flagship piece of legislation. We need employment laws fit for a modern economy.”
Business lobbyists are gearing up to make a last push to dilute the legislation.
One retail chief executive told the FT they hoped Rayner’s exit “would be good news” and the government would now allow the “sensible amendments”.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Clearly how the reshuffle will play out is yet to be seen. But the hope of many businesses, particularly those in retail employing a lot of people, will be that the changes make it easier for MPs to back the sensible Lords amendments.”
Even if the bill does pass into law in its near-original form, there will be ample opportunity for Starmer’s new cabinet to soften its impact, given the many areas in which the detail needs to be set out in secondary legislation.
“We think the real battle is not day one rights, but how do I sack someone manifestly incompetent in week three without risking an 18-month wait for a tribunal?” one business lobbyist said.
“Most of our clients will be hoping that the bill will be diluted,” one public affairs consultant said.
The ban on zero-hour and low-hours contracts will be complex to implement. The government has not yet settled how to define low-hours, how to determine regular hours in sectors with seasonal fluctuations or how to prevent a shift into self-employment.
On Saturday Starmer continued his reshuffle by making more junior appointments after a senior shake-up yesterday in which most of the cabinet switched jobs.
Among the appointments was entrepreneur Jason Stockwood, who will receive a peerage to become minister for investment, working jointly in the Department for Business and Trade and the Treasury.
New business secretary Peter Kyle — a prominent Blairite — will be responsible for the employment legislation, with a remit to woo the corporate world.
Starmer believes the reshuffle strengthens his business team and that Kyle’s appointment will help reset relations with corporate Britain.
The former science and technology secretary “works well with business audiences, he gets tech”, said one Starmer ally.
However previous business secretary Jonathan Reynolds also assiduously courted corporate leaders, but that did not assuage the tensions created by government policies.
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