Spring Statement 2025: Workers’ rights bill ‘net negative’ for economy, OBR says
The government’s workers’ rights bill will “probably [have] net negative economic impacts”, the independent fiscal watchdog has said.
Labour unveiled their workers’ rights package – the Employment Rights Bill – last year, and measures were hailed by unions as “common sense” reforms for a “fairer economy”.
But according to the Office for Budget Responsibility (OBR), which published its latest report on the UK’s economy today, the bill – which is currently being debated in the House of Lords – is “likely” to have “net negative economic impacts on employment, prices, and productivity”.
According to the OBR’s forecasters in the Economic and Fiscal Outlook for March 2025: “Employment regulation policies that affect the flexibility of businesses and labour markets or the quantity and quality of work will likely have material, and probably net negative, economic impacts on employment, prices, and productivity.
“Given these potentially significant impacts, we will incorporate a central estimate of the aggregate impacts of the policy package in our next forecast.”
The OBR has not accounted for the impact of the employment measures in this forecast – or the impact of the government’s efforts to get Brits back into jobs via the Pathways to Work green paper, as “there is not yet sufficient detail or clarity about the final policy parameters”.
Wider labour market
However, on the wider labour market, they note “vacancies [are] falling” and the “unemployment rate [is] rising”, while wage growth “remains strong”.
The OBR’s forecasters added: “The loosening likely reflects weak economic growth and subdued business confidence weighing down on labour demand.
“The increase in employer NICs is also likely to be contributing to falling recruitment and rising redundancies.”
Forecasters also noted that “important design elements” of the workers’ rights bill “will only be clarified in secondary legislation”.
Commenting after the statement, Mel Stride told journalists he wanted “to see them fundamentally drop a number of the measures in that bill because this is holding back growth”.
He added: “What we are absolutely committed to as a party is to recognise that businesses, small businesses, family businesses, businesses of all sizes, are absolutely fundamental to the future of this country.
“Unless we can get growth growing, productivity improved and businesses thriving, that makes the whole world that much more difficult.”
‘Huge majority’
Asked if he was calling on Labour to drop the bill, Stride added: “i don’t think there’s any point in trying to press them into things that they’re clearly not going to do.
“They’re committed to that; we have resisted the bill all the way through… they have a huge majority so one suspects they’ll do what they decide to do.
“What we need to have is a policy that’s got businesses and growth right at its heart.”
CityAM understands the government is focused on making the case for the workers’ rights bill, including on boosting pay and improving security for employees, and the Treasury declined to pre-empt a future OBR forecast.
Asked about the OBR’s assessment, the Chancellor told reporters at a press conference in Downing Street: “As we grow the economy we want ordinary working people to benefit, and that is why we are banning exploitative zero-hours contracts, fire-and-rehire.
“And also it’s why we are increasing the national living wage, because we want to incentivise people to go into work, and for that work to offer the security and dignity that should come from employment.”
Reeves added: “The OBR hasn’t put anything in their forecast today about the Employment Rights Bill because it is still working its way through Parliament.
“But we’re confident that it will result in ordinary working people having more money in their pockets but also having the security to spend that money because they don’t have to worry from week to week whether they’ll be in work or how many hours they’ll get.”