Rachel Reeves defends fire and rehire ‘in very limited circumstances’

Rachel Reeves, UK shadow chancellor, has said bosses must retain the right to fire and rehire their workers on inferior contracts in “very limited circumstances” if the alternative is bankruptcy and mass redundancy.

Reeves on Sunday took on Sharon Graham, leader of Unite the Union, who this weekend described Labour’s planned reforms to worker rights if the party won the general election as having “more holes in it than Swiss cheese”.

The shadow chancellor, who said a victory by the main opposition party on July 4 was within “touching distance”, insisted “fire and rehire” practices would be banned in general but that there had to be some exceptions.

“We will end fire and rehire, but when a company is facing bankruptcy, and there is no alternative, they will have to consult with their workers, and with their trade unions,” she told the BBC. “Those are very, very limited circumstances.”

On Friday Labour published a final version of its New Deal package of worker rights — the subject of intense wrangling with unions — under the new branding: “Labour’s Plan to Make Work Pay: Delivering a New Deal for Working People”.

In response, Graham said on social media platform X: “The again revised New Deal for Working People has more holes in it than Swiss cheese. The number of caveats and get-outs means it is in danger of becoming a bad bosses’ charter.”

Reeves has argued that most unions support the package, which also includes measures to ban “exploitative zero hour contracts” and to improve worker rights from the first day of employment.

Labour’s package of reforms was first set out as a green paper in 2021, but the party diluted many of the policies during a meeting of the national policy forum, its internal policymaking body, last summer.

The Financial Times revealed this month that Labour was further watering down parts of the New Deal for Working People in an attempt to quell business unease.

One of the new tweaks in the document, leaked to the FT, was fresh wording for Labour’s proposed ban on fire and rehire, adding a big caveat that said: “It is important that businesses can restructure to remain viable and preserve their workforce when there is genuinely no alternative.”

Other changes in the leaked document included the promise of a consultation with business on the entire package. Meanwhile, a pledge to give workers the “right to switch off” had also become a more ad hoc approach whereby workers and employers could have “constructive conversations” about mutually beneficial contracts.

A new version of the New Deal published on Friday revealed a handful of tweaks that will have allayed some union concerns.

Some union officials were angry that the leaked draft said Labour would only commit to “starting the legislative process” to enact the reforms within 100 days of winning power. In the final document the party said it would “introduce legislation in parliament within 100 days”, as previously promised.

Some unions had also complained that the New Deal no longer included a pledge to use public procurement to support good work by directing contracts to companies that recognised trade unions, had high environmental standards and were fully tax compliant. That passage was reinserted into the document last week. 

Reeves’s overarching mission at the start of a six-week election campaign is to reassure middle Britain that Labour would be a pro-business party capable of sound economic stewardship.

“Being able to add up at the Treasury is absolutely essential,” she said, adding that everything in the party’s manifesto would be fully costed and that there would be no economic surprises.

Reeves said there would be no increase in income tax or national insurance and that Labour’s limited tax rises — aimed at non-doms, private equity bosses and VAT tax breaks enjoyed by private schools — would fund extra NHS appointments and 6,500 new teachers in state schools.

“We will have to make difficult decisions. We won’t be able to put everything right straightaway,” she said. But she added: “There won’t be a return to austerity under a Labour government.”

Reeves confirmed a Labour government would swiftly begin a spending review to cover the financial year starting next April. Some economists have said she will have to raise taxes to ease pressures on public services.

In one of the most bullish statements yet by a senior Labour figure about the prospects of an election victory, she said: “We’re not complacent, we’re fighting for every single vote. But for the first time since I’ve been an MP, I believe we’re in touching distance of doing this.”

Meanwhile Anas Sarwar, leader of Scottish Labour, was on Sunday accused of hypocrisy after he admitted that not all staff at a business linked to his family were paid the real living wage, despite Labour’s campaign pledge to deliver “a genuine living wage” across the UK.

“Do as we say, not as we do,” said Stephen Flynn, leader of the Scottish National party at Westminster, in a post on X. “No wonder Labour are watering down their promises on worker rights.”

Sarwar told the BBC that “not every single staff member” at wholesale grocery United Wholesale (Scotland), co-founded by his father, was on the real living wage of £12 an hour. But he said there had been “significant” wage increases at the company.

In 2017, Sarwar put his stake in the company into a family trust, over which he has no control, after criticism of its payment practices.