Tories clash over plan to scrap job rights

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Political Correspondent

Michael Heseltine was at the centre of a political row last night after a leaked letter revealed secret plans by the Government to scrap the unfair- dismissal rights of millions of workers in small firms.

The proposal by Mr Heseltine, the Deputy Prime Minister, suffered a humiliating setback yesterday after the leak forced John Major to scrap an announcement planned for next Monday.

But it was clear that the Government would seek to remove the industrial- tribunal rights of up to 10 million workers if it could do so without falling foul of other laws.

Mr Major's intervention at Prime Minister's Questions followed the leak of a letter from Ian Lang, President of the Board of Trade, warning Mr Heseltine of his "grave doubts" about going public with the "immensely controversial" suggestion without taking legal advice.

The letter, passed to the Liberal Democrats, disclosed that an announcement was scheduled to be part of a package of measures on cutting red tape for small businesses at a conference on Monday. Between 9 and 10 million workers could be affected by the proposal, originating from Mr Heseltine's Deregulation Unit, with a suggecsted saving of pounds 200m in the costs of unfair dismissal and other employment claims in industrial tribunals.

Mr Lang's suggestion in the letter that legal advice should be taken from the Government's law officers stems from fears within the Department of Trade and Industry that sweeping away the rights of workers in small firms could fall foul of European law on sex discrimination, equal pay and pensions, maternity, health and safety and disability.

There was little sign yesterday, however, that ministers had any intention of dropping the plans altogether.

Tony Blair, the Labour leader, appeared to conclude after Commons exchanges with Mr Major that the proposal had been "dropped". But Mr Major confined his reply to the Monday announcement and emphasised: "There can be no employment rights if there is no employment. What we are seeking to do is to maintain a fair balance between the rights of employees and the burdens on employers. We are therefore proposing to reduce or remove unnecessary burdens."

The leaked letter indicated a determination on the part of Mr Heseltine to press ahead, despite potential legal risks.

Mr Lang said: "I . . . fully appreciate the desirability of being able to make positive statements at the conference on 11 March. I have to say, however, that I have grave doubts about the wisdom of making any announcement about this particular issue until we have received the law officers' advice on what might be legally possible.

"Any suggestion that employees in smaller firms were to be denied employment rights would, of course, be immensely controversial and it might be imprudent to attract such criticism only to have to retract the proposals at a later date."

The plan drew immediate and loud condemnation from the opposition parties and the TUC. Don Foster, the Liberal Democrat education and employment spokesman, said: "The letter reveals a shabby attempt at deregulation to save pounds 200m. It also reveals that Michael Heseltine is trying to call the tune of many different Government departments."

David Blunkett, the Labour spokesman on education and employment, said the proposal was the "thin end of the wedge" and the first step towards denying protection to all employees.

"We need positive ways to enable small firms to develop. That should include a partnership approach between employers and employees, so that far more cases are resolved through conciliation well before the tribunal stage."

John Monks, the general secretary of the TUC, said that the plans would take Britain back to the era of the Victorian sweat-shop.