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Workers’ rights in the UK are in dire need of improvement. According to a report from the ITUC, the International Trade Union Congress, the UK is rated as a “regular violator of workers’ rights,” with frequent denials of the right to strike as a significant contributor. However the solution to this might lie in an unlikely place – corporate tax policy. Using tax incentives to get firms to boost employee rights and benefits could improve the UK’s workers’ rights and revitalise British productivity.

Following the introduction of the Government’s Strikes (Minimum Service Levels) Bill, it is still the case that many of the employee benefits offered in the EU are not available for UK workers, with even more at risk of being lost as part of the Government’s sunsetting of EU laws. The sunsetting risks UK workers losing their rights to holiday pay, maternity leave and protection against insolvency. 

Indeed, many of the UK’s workers’ rights provisions fall significantly short of their European counterparts, such as Austria, Norway and Germany, with the UK only guaranteeing £96 per week for 28 weeks as Statutory Sick Pay  – the minimum legal level of sick pay. Compared to nations like Germany, which provide employees with 100% of their salary for 6 weeks, and 70% thereafter, this is not good enough. Yet workers’ rights improvements do not seem to be on the horizon. 

But, given the current Treasury deficit, less costly methods are required to get workers to return to work by ensuring improved working conditions.

Presently, corporation tax in the UK is 25%, rising from 19% as of the 2023 financial year, meaning that it is the lowest rate in the G7, even with the 6% rise. The 25% rate is intended to be a “temporary measure,” with plans to eventually return to a headline rate of 19%. If this increased rate is made permanent, there will be greater scope for implementing tax reform. This means that corporation tax can still be leveraged to encourage UK-based firms to improve working conditions. 

The Government ought to explore implementing a sliding scale of corporation tax that allows businesses to receive incremental rate reductions from the existing 25% rate down to 19%, provided they provide employees with greater benefits and workers’ protections – thus making the UK a more attractive place to work and prevent a post-Brexit brain drain.

Alternatively, the government could drop the rate down to as low as 15%, in line with the ‘global minimum’ of 15% for big businesses, the Organisation for Economic Co-operation and Development (OECD) minimum tax rate on corporate income.

This builds on the ideas that the Social Market Foundation presented in 2019 in their comment, Corporate tax proposals should be dependent on businesses doing the right thing. However, this policy would apply to all sectors, instead of the corporation tax cuts being handed out only to the low-income sectors, to incentivise that workers’ rights improvements take place across the board.

Indeed, according to research conducted by KPMG, there is significant empirical evidence to suggest that “effective tax burden does have a direct impact on FDI (Foreign Direct Investment).” This proposed approach would allow increased incentives for investment in the UK to help the UK move away from having consistently weak investment and, simultaneously boosting workers productivity due to the improvements in workers rights. Moreover, improvements in workers’ rights closely correlate with improvements in their productivity; with British productivity being the lowest in the G7 the benefits from these improvements would have profound impacts on the British economy.

A change in approach to workers’ rights is needed. However, the solution does not come from ripping up EU laws. The plans outlined in this article present a progressive solution to relegate the unproductive British worker to a thing of the past. The Government ought to act now and give the economy the push it needs and boost workers rights with a single stone.

Cormac Evans is currently doing work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Kai Pilger]