IS Beercroft Bonkers?

Workers Rights should be enhanced – not removed

I think Vince Cables reaction to a suggestion of reducing working rights was similar to most liberal democrats – that of absolute astonishment.

Creating the image of small businesses having the ability to chop and change “lazy” employees will be the direction the conservative will try to take the argument they've choosen to stir, such an approach fails to properly analyse the social and financial impact of such a system upon the UK. I hope Beercroft remains as a recommendation and is not moved upon at any point in the history of the UK.

The Social impact of such proposals is rather obvious – uncertainty, stress and unhappiness. There are very few well regarded takes on management theory that suggests that uncertainty, stress and unhappiness leads to a productive workforce or a happy family for that matter.

Unfortunately I’ve experienced the uncertainty of a family actually trying to prepare itself for the dramatic change of losing a regular income – when my father was made redundant at IBM when I was in High School. It was uncomfortable, uncertain, concerning and darn scary – and I can’t imagine what it was like for my dad but we did come out of the other end as a family that respected each other greatly.

One thing that would change in this speculative scenario would be the period of notice. My dad was informed in advance when he would be finishing, giving an ample opportunity to look around for another ship to jump to.

Conservative-supporting venture capitalist Adrian Beecroft might think this is a great idea to dramatically cut notice for redundancies etc – or no doubt some unscrupulous employers would utilise the "under performing" staff angle to dodge redundancy payments and costs associated with reliving “human resources”.

I work for a FTSE 100 company that has just recently been in the Sunday Times best big companies list – and I don’t think we got there by accident. Whilst the market place is uncertain we know that our employer has and will continue to treat us fairly. Given the environment we work in it is expected that there will be complaints against us for doing our jobs and doing what is required. If you have no certainty or loyalty to a company and have to depend on cushy contracts, are you going to think Long Term or Short Term?

When I was working for my previous employer, I as a human resource was subject to a "TUPE" – under Beercroft proposals I would not have been able to carry my rights that I did at that point transfer - another stupid proposal on the list.

Putting all of this to the side, as I could most certainly go on and expand on the social harm this would create, I will actually highlight my views on the purpose of this report and their economic and financial flaws.

RISK

The most fatal flaws are with the risks that Beercroft fails properly to acknowledge – but the risks that financial institutions would most certainly have to.

If you are applying for a mortgage, the underwriter of that mortgage wants to assess the appropriate risks – are you employed? Is your employment situation stable? How much do you earn? How much do you spend? Etc

If in the Beercroft proposal scenario your employment status becomes less stable – should a bank, such as RBS for example, not understand that there is an increased risk in their lending you could see massive losses and massive re-possession rates. In order to substitute the risk they will likely require bigger deposits and lower spending to balance the risks – and your product rate might become a bit less favourable.

General Banking – Credit cards, loans and overdraft facilities would have to be reigned in. Why would a bank want to lend somebody on a lower uncertain salary want to accept the increased risk when a considerable number of their establishments have suffered heavy losses?

Economic picture on mortgages and general lending on their own suggest that the poorer end of society would become more conservative in their spending (as if the cost of living has not already made them become so?) and have less flexibility in lending. This would surely mean less money being spent on non-essential goods.

I could go on to analyse how it would impact the insurance market, but that’s a bit close to home… so maybe I’ll analyse how it would effect bigger household ticket items. 

For an extreme “what if” example, I will use a finance arrangement on a sofa – in England and Wales an unsecured financial arrangement would still have the risk of somebody coming around to grab their items back. In Scotland, you would already be at an increased risk with the finance arrangement; however an unfair and increased risk would be likely to push up with APR etc on the finance arrangement all over the UK to account for this. As a result of the sofa becoming more expensive to sell the sales rep may struggle to hit his targets and then end up being disposed of for being a “lazy” employee, his mortgage may stop being paid as he will be out of a job etc. (Somebody will say this is not a realistic scenario)

It might not be quite as “cool” a scenario as Karl Marx using coats to describe the value of an employees labour (reference for anybody who has read Kapital) but I could go on highlighting just how ludicrous the Beercroft proposals are.

The Germans have for the main part managed to maintain employment rights and maintain a reasonably fair redundancy arrangements for the most part, so would it make sense to make British employees the whipping boys of Europe? No!

If you use the examples from other countries it would be more of a viable situation for the UK to give their employees more working rights – which would give employees more certainty to go out and spend, and also give them better time to prepare for change in any situation they may become redundant. More employment rights would reduce the risk financial institutions face when lending and as a result boost growth by economic activity. Foreign investors want to invest in an economic community in which things are happening, not in one in which everything is shutting down.

In uncertain unstable markets, the markets want to find stability and certainty - the beercroft proposals would throw everything up in the air.

I agree with Vince Cable! The Labour party ignored him after budgets for years when he predicted the original financial storms, Northern Rock etc… the Conservative party should not make the same mistake when he highlights the serious stupidity presented by Beercroft.