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Osborne cuts costly tribunals in bid to boost the economy

By Brendan Carlin for The Mail on Sunday
Updated: 19:30 EST, 1 October 2011

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Focused: Chancellor George Osborne says his move will help small businesses

George Osborne yesterday unveiled plans to kick-start the economy by cutting workers’ rights to costly employment tribunals.

The Chancellor announced plans to prevent those with less than two years’ service from making unfair dismissal cases against their bosses.

The qualification period is currently 12 months but under Mr Osborne’s plan it will be doubled from next April.

The proposal, to be formally unveiled at the Tory conference in Manchester, which opens today, came as Mr Osborne sought to show that promoting growth while also cutting the budget deficit was his main focus.

The Chancellor conceded the employment tribunal plan was ‘not going to be popular’ but he insisted it would make it easier for company bosses to take people on in the first place.

He said: ‘There are some vested interests who will attack us for it, but it’s crucial to give business the confidence that they can take people on, give them the chance, put them into work, without immediately facing the prospect of tribunal hearings and all sorts of costs that will otherwise put them off hiring people.’

The rule change is expected to benefit business by about £6million a year in lower legal fees and payouts, but employees are expected to lose around £1million in unfair dismissal awards.

About 236,000 employment tribunal claims were made last year, with an average award of £8,900 for successful claimants, while the average cost of defending a claim was £4,000, according to Treasury officials.

However, employees will keep so-called ‘day one’ rights, such as the right not to be discriminated against.

Prime Minister David Cameron and his wife Samantha arrive in Manchester on the eve of the Conservative Party Conference.

Big week ahead: David Cameron and wife Samantha arrive at the Manchester Central Conference Centre (right), where the Tory conference is being held

The move was met with anger from union leaders, while Labour accused the Government of making ‘the wrong people pay’.

But John Cridland, CBI director general, welcomed the move, saying: ‘Extending the qualifying period for unfair dismissal is a very positive step.

‘We have been urging the Government to do everything it can to make it easier for firms to grow and create jobs, and this will give employers – especially smaller ones – more confidence to hire.’

On the eve of the Tory conference, Mr Osborne also revealed plans to stop the taxpayer having to pay the salaries of 150 staff at various Whitehall departments who work full-time for their unions.

Damning: Senior Tory MP Andrew Tyrie claimed the Government did not have a 'coherent and credible' plan for growth

But the Chancellor made clear he was unlikely to offer tax cuts before the next General Election, scheduled for 2015.

Despite previous expectations that he would be able to find some kind of pre-Election sweeteners, Mr Osborne said it would depend on ‘how things develop’ between now and then.

‘I’m a Conservative who believes in lower taxes. They lead to a more enterprising economy.

‘But I’m not somebody who believes you can fund lower taxes by borrowing more money because that is a deceit and the public are smart enough to see straight through it,’ the Chancellor said.

However, Mr Osborne was hit by damaging claims from senior Tory MP Andrew Tyrie that the Government did not have a ‘coherent and credible’ plan for growth.

In an interview, Mr Tyrie, chairman of the Commons’ Treasury committee, said: ‘The Big Society, localism, the green strategy – whether right or wrong, these and other initiatives have seemed at best irrelevant to the task in hand, if not downright contradictory to it.

‘Likewise, the huge spending hike on overseas aid and the cost of the Libyan expedition.’