Curbs on workers' rights are needed to stop Britain "pricing itself out of the world economy," George Osborne said.
The Chancellor confirmed that, despite objections from the Liberal Democrats, the Government is still considering reforms of employment rights, including a plan to allow small firms employing fewer than 10 to sack workers without allowing them to claim unfair dismissal. Instead, such workers would be entitled to cash compensation under the "no fault dismissal" plan recommended in a review for Downing Street by Adrian Beecroft, a venture capitalist and Conservative Party donor.
"We know many firms are afraid to hire new staff because of their fear about the costs involved if it doesn't work out," Mr Osborne said.
The Government would also consult on changing the TUPE rules, which maintain existing pay and conditions when workers transfer from one employer to another.
The Chancellor said: "This Government has introduced flexible working practices and we are committed to fair rights for employees. But what about the right to get a job in the first place? Or the right to work all hours running a small business and not be sued out of existence by the costs of an employment tribunal? It's no good endlessly comparing ourselves with other European countries. The entire continent is pricing itself out of the world economy."
Unions reacted angrily. Brendan Barber, the TUC general secretary, warned: "Cutting employment rights will not create a single extra job, but they will make employees feel more insecure and even less likely to spend."
Billy Hayes, leader of the Communication Workers Union, said: "How typical of the Tories to launch a further attack on workers' rights when our economy is flatlining and unemployment soaring. Of course, this will delight unscrupulous employers across the country, but it will make life even harder for workers and their families."
Sean Drury, a partner at PwC, said the Government's proposals would reassure overseas investors that "the UK is a flexible location in respect of employment and deployment of staff". He added: "One of the drawcards of the UK for being a base for employment in Europe is around the attractiveness of our employment law compared to some European countries that have restrictive practices that scare companies focused on inbound investment."
Richard Fleming, UK head of restructuring at KPMG, welcomed the review of the TUPE rules. He said: "Anything that enables more jobs to be saved by promoting business rescue prior to or via an insolvency process should be welcomed. Potential buyers of businesses out of insolvency are often put off by the risk of TUPE claims from employees not directly involved in the parts of the business being sold."
Case study: 'He said he was helping familes, but he hasn't helped us'
Imogen Dangerfield, 38, from Ipswich, is a first aid trainer with the British Red Cross. She and her partner Chris Hoyt have a five-month-old son, James
"I am a new mum, working for a charity. My partner works in local government. Before I went on maternity leave I was on £18,000 a year and my partner is on £26,000. We both love our jobs and we're not on the breadline, but things are pretty tight. The only state benefit we get is child benefit and £40 in tax credit per month. We earn too much to get any significant Government help.
"We are having to watch the pennies. Christmas is coming up – this year we'll be giving homemade presents. I would give up my car if I could but I will need it when I go back to work. We've also had to give up on holidays. They weren't seen as a luxury before, but they are now.
"There's not a lot in this statement for me and my family. [Mr Osborne] spoke about helping families with the rising cost of living and he mentioned energy prices, but doesn't seem to have done anything about it. The 1 per cent public sector pay cap will impact on my partner's salary for the next couple of years.
"I'm not sure if the announcement of free nursery care for two-year-olds will affect us – the Chancellor said it would be for the most disadvantaged, but as we're in the middle I don't know if James will get that free place. "He said he was 'helping families with the cost of living' – but he hasn't helped my family particularly. The right to buy reform feels a bit unfair – we have a two-bedroomed house and can't afford to move. Yet people in social housing are going to get up to 50 per cent off the cost of their house."
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