Insiders suggest Cameron’s team initially keen on some proposals despite opposition from ministers including Cable
It started with a call to Vince Cable’s business department from two of the government’s most influential forces – the prime minister’s policy guru, Steve Hilton, and the Tory cabinet office fixer, Oliver Letwin.
As so often, the coalition’s Red Tape Challenge to have a bonfire of regulations came up; Hilton and Letwin suggested to officials on the conference line that the department turn its attention to employment law and commission a report on the subject, as it had done for retail and other areas.
They then suggested Adrian Beecroft, a venture capitalist – whose investments include the controversial high-interest pay-day lender Wonga – and a Conservative donor.
Whether that was the point of the call is not clear, butDavid Cameron told MPs in the Commons that he had commissioned it. Technically, however, it was then employment minister Ed Davey – now energy and climate secretary – who made the formal approach and met Beecroft at least once.
The idea of asking “experts” to suggest reforms was not unusual, said one insider, adding: “If we didn’t do that we’d get the public writing in with quite randomised points.”
A draft of the report appeared on the internet after it was leaked to the Daily Telegraph this week. A final version was made public only after the leaked draft appeared: this official version, dated 12 days later, on 24 October, had one very significant change – the executive summary was taken out, including a line which has inflamed opinion on one of the most controversial measures: “The downside of the proposal is that some people would be dismissed simply because their employer did not like them. While this is sad, I believe it is a price worth paying for all the benefits.”
The final report was formally submitted to the Department for Business, Innovation and Skills (BIS). If they had not already read it, Letwin and Hilton would have seen Beecroft’s report soon afterwards when it was presented for discussion at a meeting with Davey, a Liberal Democrat adviser from No 10, and cabinet office officials .
Officials claim some of Beecroft’s recommendations had already been taken up by the government, including extending the time people had to work for a company before they could claim unfair dismissal from one year to two, and some were quickly rejected.
Inevitably a few of the measures caused tension, and none more so than the suggestion that “microcompanies”, employing fewer than 10 staff, could use “compensated no-fault dismissal” to get rid of staff.
Reports began to emerge in November of tension over the issue, with insiders suggesting Cameron’s team was very keen, persuaded by Beecroft’s argument that underperforming staff would be replaced, and as firms became more productive they would hire more employees. Others were deeply opposed. Among them is Vince Cable, who told the BBC this week: “We don’t need to scare the wits out of workers with threats to dismiss them. It is completely the wrong approach.”
The Treasury didn’t appear to support the initiative, so as a compromise BIS issued a “call for evidence”. This set some conditions for “compensated no-fault dismissal”: employees would be eligible for automatic severance pay equal to what they would have had under a more traditional redundancy; they would be able to appeal to a tribunal for unfair dismissal if they believed they had been sacked for reasons of sex, race, disability, sexual orientation, age, religion or belief, or if they thought they had been sacked for an “automatically unfair reason”, such as whistleblowing or asking for the minimum wage.
“It would not therefore given complete peace of mind to an employer,” added the BIS consultation.