Labour's third term - voters permitting

What is the significance of the unofficial agreement between ministers and union officials over the future of the Labour government's employment policies?

It is seldom possible to look too far into the future without the view becoming very hazy indeed. But thanks to a 4am deal between the Labour leadership and the general secretaries of some of the more influential trade unions, post-election predictions about the changing shape of UK employment rights have just become a little easier.

This slot in IRS Employment Review usually features the expert view of a leading HR practitioner or employment specialist on a subject featured within the journal. This time around, however, we did not wish to miss the opportunity to begin to dissect the emerging social contract - if the phrase is permissible - within the Labour movement.

In the run up to the annual meeting of the Labour Party's policy forum in July, there had been considerable speculation about the future of the relationship between Labour and the unions. One of Labour's founding organisations, the rail union RMT, has already disaffiliated from the party, and there had been threatening noises from others - some of them far larger and far more important as sources of funding and as routes to important parts of the electorate.

At the root of this divide, there has been a range of wider political issues stretching from the war in Iraq to the government's record as an employer willing to shift public sector work into the private sector, and a sense that the prime minister was fundamentally hostile to the organic link between the political and industrial wings of the Labour movement. But, of course, it has been Labour's unwillingness to go further than it already has in extending employment rights that has caused the most immediate bitterness - a problem that cannot have been helped by the fact that most of the extension in employment rights that there has been since 1997 has come as a result of European rather than UK political initiatives.

It now appears that ministers have succeeded in gaining at least a grudging acceptance that there will be no substantial further change as a result of UK government policies over a third term of Labour government . . . should the electorate so decide.

The headlines which followed the meeting of the policy forum concentrated naturally enough on the changes that ministers do want to make in that third term - the most eye-catching of which is undoubtedly to ensure that bank holidays cannot be counted by employers as part of the statutory 20 days' annual leave to which all employees are entitled.

In point of fact, this will merely bring the UK into line with what already happens in much of the rest of Europe. And, as our own recent research has shown, such a move will have an effect on only the 25% of employers that currently offer fewer than 20 days' leave excluding bank holidays (see Have a break: annual leave). This is a move that will benefit a considerable number of employees and bring costs to a significant minority of employers, but it is important to stress that most workers and three out of four employers will see no change as a result of this policy.

Other areas of agreement reported to have been reached include an extension of employment rights to temporary and agency workers, the renewed promise of legislation on corporate manslaughter, and an extension of the protections afforded to those on strike from the current eight to 12 weeks.

Perhaps of greater significance, however, is what the agreement seems not to cover. The long-coveted extension of many employment rights and protections to those working in companies of fewer than 20 employees has been denied to the unions once again. There will be no extension of employment rights to workers from their first day in the job, or even after six months, as the unions would have wanted. And there will be no compulsion on employers to contribute to pension funds.

Between now and the election, probably in spring 2005, all this may of course change - though that appears unlikely. There may be a Conservative revival, or a Liberal Democrat breakthrough, though some might think that less likely still. The most probable development is that, tidied up and repackaged, these will be reforms pursued by the government over the next three to four years.