During the past year the Coalition Government has taken several steps to boost the economy by introducing new labour market reforms. This week it emerged that there are those in Whitehall who advocate for further radical measures, hoping that this would encourage economic growth.
The Government has justified the reforms as combating unemployment, but this desired outcome is not reflected in recent numbers. Rather, new figures indicate that unemployment has increased significantly. The official numbers show that unemployment rose by 114,000 between June and August 2011, to 2.57 million.
As a result, the Government’s employment law reforms are being questioned increasingly. Ed Miliband, the opposition leader, said "A year ago ... the prime minister justified his economic policy by saying unemployment would fall this year, next year and the year after. Isn't it time he admitted his plan isn't working?"
Despite accusations of the measures being unsuccessful, the Prime Minster, David Cameron, remains convinced that his Government will be able to reduce the deficit.
This week, an unofficial report emerged from Downing Street, which advocated further significant measures. The report was prepared by Adrian Beecroft, a Conservative donor. In it, he claimed that unfair dismissal laws should be scrapped completely. He considers that although this would lead to greater insecurity among employees, it was a price worth paying for economic growth.
However, the unofficial proposal has been heavily criticised by many cross-party members, including Vince Cable, the Business Secretary. Cable said, "No evidence has been advanced that I have seen that it will improve labour market flexibility in general, or have any beneficial effect, but if anyone can produce any, we will look at it."
The Shadow Business Secretary, Chuka Umunna, thought that the leaked report showed that the Government did not have the right focus. She said, "I find it absolutely extraordinary that the government should be preoccupying itself with how it can make it easier to fire people when in that context it should be looking at how it can make it easier to hire people."
On the other hand, business advocates consider that the report’s suggestions, if implemented, would have positive outcomes. For instance, Simon Walker, Director General of the Institute of Directors, said "The IoD strongly supports radical change to employee dismissal processes and fully backs 'Compensated No Fault Dismissal' as part of a solution. Ministers would do well to act upon Mr Beecroft's suggestions, freeing up wasted time and money from litigation and ensuring it is instead channelled into job creation and business growth."
The Government is being increasingly pressured to find a solution to the UK’s financial crisis, particularly as it is being less and less attributed to the eurozone tumult. Whether increased insecurity is the solution to the problems is being increasingly questioned as the economy remains in a fragile state.
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