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Policy Exchange: Trade Unions and modernising industrial relations

Industrial relations in the UK are in need of significant modernisation, a report from think tank Policy Exchange argues.

Changes in the nature of employment and the workforce, increased concentration of union membership, the proliferation of litigation over the last decade and the shift in the balance of power to the trade unions has created a situation where the existing framework needs extensive revision, says the report.- Modernising Industrial Relations.

Key findings:
* The legal balance between trade unions, union members and employers no longer reflects the realities of low union membership in most sectors.  A strike can go ahead with complete legal legitimacy with only a small minority of the trade union members – and an extreme minority of the actual labour force – voting in favour of it. In one recent case, only 31% of unionised staff actually voted to reject British Airway’s pay offer.

Monopoly conditions exist for unions (vs workers) in many workplaces. Workers usually have no choice over the union they want to join.

Union membership and strike action is heavily concentrated in the public sector.

* Taxpayer funding of unions is extensive – and often hidden.  Direct payments to trade unions of at least £78.5m have been made since 1998.

Key proposals and reforms within the current framework:
* The ballot paper should contain more information concerning the nature, frequency and length of industrial action to be authorised, including identifying a specific grievance.  At present it need not do so, and material is often circulated alongside the ballot which refers to a whole range of grievances and authorizes a range of unexpected industrial action options.

* Require that a majority of employees in the balloted workplace vote, and/or require that a minimum of 40% of the trade unionised workforce vote in favour of strike action, in addition to a majority of the votes cast. This would avoid strikes based on very low percentage turnouts when only very small numbers of workers are members of a union.

* Employers should be permitted to use agency staff to carry out the duties which striking employees would otherwise have performed.  This would undo restrictions introduced in 2004.

* Reduce the period of protection from unfair dismissal during a strike, for example from twelve back to eight weeks, as per the Employment Relations Act 1999, undoing changes made by the Employment Relations Act 2004. This protection should be limited to selective dismissal, as before 1999.

Key proposals on changing the framework
* Aim to replace the system of monopoly unions bargaining with monopsony (sole purchaser of a good or service) employers with, instead, the use of competition
policy to address monopsony power on the part of employers.

Investigate whether unions are monopolists in respect of the provision of union services to workers. If they are, then act to break up monopoly unions into
smaller more competitive units.

Proposals on political donations and taxpayer funding
* The Government should remove various forms of taxpayer funding for Trade Unions. These payments, totalling at least £78.5 million since 1998, lack a clear rationale and are not managed in a very transparent way.

* Members should be given “opt-in” choices regarding political donations. Instead of opt-out arrangements which default members into making political donations,  donations to parties should only be made for members who choose to opt-in. The beneficiary party should be named, and increases in such fees should require consent.

No union membership fee should be deducted direct from a pay packet.  Unions should also provide notice to their members if the cost rises. This would create transparency which might promote value for money.

Andrew Lilico, Policy Exchange’s Chief Economist and co-author of the report, said: “The existing framework for industrial relations is out of kilter with the realities of the makeup of the modern work force and the relationship between employers and employees.

There are some specific reforms that should be made with regards to rebalancing the power between trade unions, workers and employers. Particularly important ones include requiring that ballots identify a specific grievance and authorise a particular set of industrial action, allowing more use of agency staff, and investigating whether unions are monopolies in respect of their provision of services to workers. Some of the large multi-sector unions may be simply too big and need to be broken up into smaller competing units.”

Ed Holmes, co-author of the report and Research Fellow in Policy Exchange’s Economics Unit, said: “Taxpayer funding of unions is extensive – and often hidden. There is a clear need for greater transparency. It is difficult to identify any good rationale for the existence of the Trade Union Modernisation Fund, even in periods when public spending was rising rapidly.  In a time a fiscal belt-tightening, it should be abolished. 

“Trade unions have a ring-fenced political fund explicitly for political activity – which comes from the levy on its members. There is no reason that any one party or another should be the automatic default party of all employees, such that employees need to explicitly state they do not wish to donate to its activities, as is currently the case. Members should instead be given an ‘opt-in’ choice with regards to political donations.”


For a full list of proposals for reform, please see page 4 -7 of the report.

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