Is Labour about to prune its plan to boost workers’ rights?

In his pre-election budget last Wednesday, Jeremy Hunt rehearsed a new attack line against Labour, alongside familiar arguments on tax and spend: Keir Starmer’s party would, the chancellor said, “destroy jobs”.

Remarks fed to newspapers in advance of Hunt’s moment in the spotlight talked of the “70 new burdens on employers” that Labour would impose.

It was a sign that the Conservatives hope to turn Labour’s plans for increasing workers’ rights – championed by the deputy leader Angela Rayner – into a problem for the party, potentially stoking internal pressure for the proposals to be watered down.

Rayner toured Scottish constituencies over a weekend last month, as part of a UK-wide push to put workers’ rights front and centre of Labour’s pitch for the general election. Candidates and campaigners in seats across the country turned out, brandishing placards highlighting the “New Deal for Working People”.

But some of the policies behind the promise to “make Britain work for working people” are starting to draw the fire of business leaders.

And after the drastic pruning of Labour’s £28bn green prosperity pledge, some activists fret that workers’ rights could be the next area to be pared back, as the party prepares for what is expected to be a brutal election campaign.

With Labour’s consistent poll lead making a Starmer premiership look highly probable, business groups are increasingly focused on the detail of the party’s policies.

The workers’ rights plan, hammered out with Labour’s trade union backers, includes a ban on zero-hours contracts, a new system of pay bargaining in social care, employment rights from the first day of a job and an end to “hire and fire”.

Alex Hall-Chen, a principal policy adviser for employment at the bosses’ lobby group the Institute of Directors (IoD), says parts of it will be welcomed by many businesses.

However, she has concerns, particularly about the ban on zero-hours contracts. “This is not us saying there’s no need for reform: I think everybody recognises that there are issues with the system. But a lot of our members would say there can be a really valid role for zero-hours contracts, not just for the employer but for the employee,” says Hall-Chen.

The president of the Confederation of British Industry business lobby group has also spoken out. Rupert Soames is urging Labour to avoid what he calls a “European model” of labour market laws – which, he argues, make firms reluctant to take on workers because it is harder to lay them off.

“The UK has basically been a jobs factory,” says Soames. “In France … people will spend £100,000 without blinking on some new software if it means they can employ two less people, because once you’ve got people it’s really difficult to get rid of them.

“Do we want to have an economy where businesses are keen to employ people because it’s easy or do we want to have one where actually stable employment conditions mean more to people?”

Hannah Peaker, the director of policy at the New Economics Foundation, a leftwing thinktank, says: “The new deal for working people has been under attack for quite a long time now. The parts that businesses were most concerned about – you’ve already seen some watering down there.”

She pointed to the shift from promising a “single status” of worker when the new deal for working people was first announced in 2021, to merely offering a consultation on moving towards the idea.

This policy is aimed at tackling the fact that under UK employment law there is a category of “worker” introduced in the mid-1990s that does not confer the full rights of an “employee”. Unions argue that, alongside the existence of zero-hours contracts, this has contributed to the emergence of millions of low-paid, precarious jobs.

Introducing a “single status” would see the “worker” category disappear, and anyone habitually working for the same employer given full rights, including sick pay and pensions auto-enrolment, for example. Such a policy would be likely to be highly contentious with some gig economy employers.

The leader of the Unite union, Sharon Graham, has pointed to other areas where she claims the new deal for working people has been diluted – complaining that Labour is now promising to stop “exploitative” zero-hours contracts, for example, reading this as a signal that the party is backing away from an outright ban.

However, Labour insiders point to three reasons why the party is not poised for a full-blown U-turn on workers’ rights, akin to its abandonment of the £28bn green pledge.

The first is the unions’ vehement support for the package. While Starmer’s Labour has been building up links with wealthy individual donors, the unions are still an essential source of financial support, as well as being woven into Labour’s governance structure – and providing a ready pool of on-the-ground activists.

Michael Jacobs, a professor of political economy at the University of Sheffield, says: “I don’t think it is the next domino to fall: I think the lobby for it inside the Labour party is much stronger than the lobby for the green stuff.”

Kate Bell, the assistant general secretary of the Trades Union Congress, confirms that the workers’ rights package is the unions’ top priority.

“We believe the package of levelling up workers’ rights is absolutely vital – not just to deliver workers the job security they deserve at work, but also transform our economy so that we have an economy that is based on good quality work, productive work, investment in people, investment in businesses rather than a race to the bottom,” she says.

The second reason the workers’ rights plan is not about to be scrapped is that it is regarded as a solid retail offer to working-class voters, and is easier to discuss on the doorstep than Starmer’s overarching “missions”.

Policies such as an end to zero-hours contracts have featured prominently in recent byelection campaigns, including October’s victory over the Scottish National party in Rutherglen and Hamilton West. And Rayner’s team insist much of the preparatory work for implementing the package is well under way.

The third factor in favour is Starmer’s buy-in. While he is often criticised for lacking a fully worked-through political project, he has frequently pointed to the need to ensure working people have respect and security – highlighting his care worker sister, for example.

Starmer-watchers say this may be the closest thing the leader has to a personal credo. In his speech to the Labour party conference last year, he used the phrase “working people” 21 times, promising to create “a Britain built to last. Where working people are respected.”

And he is clearly primed for a backlash, telling Labour’s recent business conference: “We are going to level up workers’ rights in a way that has not been attempted for decades. And that might not please everyone in the room or the wider business community.

“But nobody can doubt that our labour market is at the heart of our challenges on productivity.” In other words, Starmer and his shadow chancellor, Rachel Reeves, see increasing workers’ rights as an integral part of their plan for delivering economic growth.

While ditching the workers’ rights plan appears highly unlikely, however, even the most determined optimists about Labour’s proposals say the details of how they are enacted will be critical – and vulnerable to external pressure.

Hall-Chen says the IoD is “hopeful for a very pragmatic approach from Labour that will involve a lot of engagement with the business community just to make sure that there aren’t unintended consequences”.

Or as Jacobs, a former adviser to Gordon Brown, puts it: “In government it is really about holding your nerve: because in government you really get lobbied.”