The Regulatory Policy Committee also said Labour’s impact assessment of its workers’ rights reforms is “not fit for purpose”.
The committee lashed out at the rationale used by the Department of Business and Trade to justify the changes made in the Employment Rights Bill.
It suggested that the figures used for the financial impact may need “clarifying”, and that the cost of an agreement on adult social care pay may be “much higher” than the £1 billion DBT claimed.
Analysis published alongside the employment rights bill last month concluded that the legislation – a central plank of Labour’s promise to boost living standards – would cost businesses up to £5bn a year, with the effects concentrated in low-wage sectors.
The government argues that workers would benefit to a similar extent, making the overall economic impact minimal, while giving individuals more security and control of their working lives.
But the RPC, an independent watchdog that scrutinises the evidence base for policy decisions, has said the government had not given enough evidence to justify eight of the measures contained in the wide-ranging bill, including some of the most controversial changes.
This meant the government’s assessment of the bill’s overall impact was inadequate, according to an assessment by the watchdog.
The RPC gave a red rating, meaning the analysis was not fit for purpose, to costings for the introduction of day-one protection against unfair dismissal, the repeal of anti-strike laws, a new right to guaranteed hours for workers on insecure contracts, and curbs on “fire and rehire” practices.
These measures have caused concern among business groups, which say the triple whammy of the bill, the Budget increase in payroll taxes, and a rising minimum wage will hit hiring, suppress wages, cramp business investment and fuel inflation.
“Given the number and reach of the measures, it would be proportionate to undertake labour market and broader macroeconomic analysis, to understand the overall impact on employment, wages and output, and particular, the pass-through of employer costs to employees,” the RPC said.
Tina McKenzie, policy chair of the Federation of Small Businesses, said the findings should be “a sharp wake-up call” for ministers who needed to “think again about the dangers of a cavalier approach to jobs and work”.
She added: “The country cannot afford to pile further cost and risk on to small employers based on such an overwhelmingly weak evidence base.”
The RPC slammed the government for failing to demonstrate the scale of the problems it aimed to address, and for not comparing its proposals with alternatives, beyond a “do nothing” option.
Its assessment, published last week, also noted that costings of some individual measures, such as the restrictions on fire and rehire, had not been included in the estimate of the bill’s impact because they were uncertain, even though they were potentially expensive.
Shadow business secretary Andrew Griffith said: “Labour’s impact assessment for their radical trade union charter has been rated ‘not fit for purpose’ by the government’s own regulator.
“But businesses up and down the country knew this already. Just like the National Insurance Jobs’ Tax, this Bill is the second wave of an attack on job creators.”
A government spokesperson said the “initial, indicative” assessments of the primary legislation represented “the best estimate of likely impact at this stage”, but that “we intend to refine our analysis and conduct further assessment as the bill progresses”.
Many of the details of the reforms’ implementation are not yet decided and will be set out in regulation at a later stage.
Consultations will close next week on proposals to make it easier for unions to win collective bargaining rights; determine rates of statutory sick pay for low earners; and ensure that the new ban on “exploitative” zero-hour contracts applies to agency workers.
