Ending opt-out from EU working rules could cost UK £2300 per household
16 December 2008
The European Parliament will tomorrow vote on a proposal which could end the UK's opt-out from the Working Time Directive. The Directive caps working time at 48 hours a week. The British Government has consistently defended the UK's partial exemption from these rules, in fear of increased costs to businesses and the public sector.
The vote on working time comes just weeks after MEPs voted in favour of the Agency Workers' Directive, another measure which will raise costs significantly for UK businesses.
If MEPs vote against extending the opt-out it would not only be a blow for British businesses fighting recession, but will create a very awkward situation for the Government, which had previously claimed that the right for UK workers to choose to work longer than 48 hours a week had been permanently secured as part of a 'package' deal on agency workers in June.
Despite the huge implications, the Government says that it has not published any impact assessment on the cost to the UK economy of losing the opt-out. An official in the Department for Business, Enterprise and Regulatory Reform told Open Europe that there was no assessment of the cost published because "no one expected the opt-out to come up for negotiation".
However, assuming that between 2.3 and 3.2 million employees work more than 48 hours a week[1], Open Europe has estimated that ending the opt-out could cost the UK economy between £47.74 billion and £66.45 billion by 2020, with a middle estimate of £57 billion. The calculations are based on the opt-out elapsing in 2011.
To put this in to context:
* This is more than £2,300 per household.
* It is more than five times the UK's annual contribution to the EU budget.
* For the same amount we could cut income tax by almost 2% (a move that would cost the Government £4.2 billion a year).
* The amount represents the entire GDP of several smaller European countries.
* It is more than this year's defence and transport budget combined.
Mats Persson, Research Director at Open Europe, said:
"MEPs need to think very carefully about this important vote. We're in the middle of a recession, which both businesses and the public sector will be paying off for years to come. It would be crazy for the European Parliament to choose now to start making EU working time rules even more of a burden."
"The real losers from this deal will be ordinary workers and taxpayers. Politicians should be focusing on how to cut taxes and create jobs to boost the economy, not forcing through expensive new EU rules."
"The UK Government is risking a very red face. It has already lost the EU argument on flexible workers, and now its so-called 'deal' on the opt-out is unravelling. It may also fail in its aim to scrap ludicrous EU rules for on-call time for doctors, which have already cost the NHS billions."
"This has the potential to become an excellent case study in how not to negotiate in Europe."
Notes for editors
To read the full briefing and for more details on our calculations of the cost, please click the link below:
www.openeurope.org.uk/research/wtdoptout.pdf
For more information please call Mats Persson on 020 7 197 2333, or 0779 94 606 91
Background:
The 1993 EU Working Time Directive stipulates that workers must not work more than an average of 48 hours a week, calculated over any four-month period. However, provisions were made for member states to opt out from these rules under certain conditions. Initially only the UK made use of this provision, but now approximately 15 member states employ the opt-out in one form or another.
Following two highly controversial rulings from the European Court of Justice, several member states pushed hard for the text to be revised. In the Simap and Jaeger cases, in 2000 and 2003 respectively, the Court ruled that all time spent on call should be classified as working time, even where the employee is not actively engaged in his or her duties.[2] The rulings imposed huge costs on member states' public sectors, particularly for the health sectors.
On-call time and compensatory rest were the key issues addressed in a deal agreed amongst EU ministers in June this year.
The UK Government had insisted that the UK's opt-out was safe in this compromise deal, following a package agreement in which Britain accepted less flexible rules for temporary agency workers - under the so-called Agency Workers Directive - in return for retaining the opt-out on working time. For years, the UK Government had opposed the directive on agency workers, amid fear of job losses and increased costs for businesses. The CBI estimated that the directive would cost the UK 250,000 jobs.[3] However, the failure to secure the right for flexible working hours for agency workers was justified on basis of securing the opt-out, according to the Government.
Then Business Secretary John Hutton insisted that:
"This is a very good deal for the UK... Flexibility has been critical to our ability to create an extra three million jobs over the past decade. That flexibility has been preserved by ensuring workers can continue to have choice over their working hours in future years. This agreement means that people remain free to earn overtime and businesses can cope during busy times."[4]
However, Employment Minister Pat McFadden told a Lords' committee: "we never particularly wanted these two Directives to be taken as a package... but most Member States wanted it and decided that way."[5] Following the June agreement, McFadden played down fears that the British working time opt-out was under threat. "I don't think it will reappear," he told journalists.[6]
European Parliament's Employment Committee votes to scrap the opt-out
Nonetheless, on 5 November this year, the European Parliament's Employment Committee took a position "diametrically opposed" to that of the council - to use the Committee's own words.[7] In a report outlining amendments for the full Parliament to vote on, the committee proposed:
* End of the UK's opt-out by 2011.[8]
* On-call time to be considered working time - despite this being the very reason ministers revised the proposal in the first place.
* Compensatory rest periods should be granted at the end of the working period. [9]
Indeed, the position agreed by the June council was not ideal from a British perspective, not least in respect of the higher administrative costs to business and new caps on the number of hours employees are allowed to work each week when using the opt-out.
However, this fades in comparison to the proposals by the EP Committee.
The Council had agreed that:
* The working week in the EU should continue to be limited to a maximum of 48 hours, except where an individual worker chooses to opt out. In other words, the UK's opt-out should remain.
* A new cap for workers who opt out, either 60 hours or 65 hours on average a week depending on the circumstances. This should be compared to the present limit of 78 hours in the UK.
* Tougher conditions for using the opt-out, including employers not being allowed to have an employee sign an opt-out for the first month of employment, and a new requirement for employers to keep records on working hours of opted-out workers.
* Member states would be given the possibility to extend the reference period for calculating the 48-hour maximum working week from 4 months to a year in some circumstances.
* On-call time to be split into active and inactive on-call time, with compensatory rest periods granted within a reasonable time period following the end of the shift. This was seen as a way to solve the controversial ECJ-rulings.
What happens next?
The issue of the opt-out will be voted on by all MEPs on 17 December (in the European Parliament plenary session). The end of the UK opt-out could well be approved. The issue will then be debated by the Council of Ministers where the UK would be under "severe pressure" to give way, according David Yeandle of the manufacturers body EEF.[10]
Business Secretary Peter Mandelson said that the UK will continue to "stand firm" on the issue and argues that the opt-out "is essential to Britain's labour market flexibility that has helped to create an extra three million jobs". However, the issue will be subject to a qualified majority vote, meaning the UK could be outvoted and forced to cap working hours.[11]
Open Europe hosted a panel debate on this subject in London last week. Please click here to read a summary of the event:
http://www.openeurope.org.uk/events/
[1] Estimates on the number workers making use of the working time directive opt-out vary. The CBI quotes the ONS Labour Force Survey data putting the figure at over 3 million (10% of the workers) (see: http://www.cbi.org.uk/ndbs/press.nsf/0363c1f07c6ca12a8025671c00381cc7/c6e0fac05410f0ba80257520005d5996?OpenDocument. The TUC suggests a similar figure of 12.7% (http://www.tuc.org.uk/work_life/tuc-15747-f0.cfm). However, it is inappropriate to assume 100% compliance should the opt-out be removed, and our range estimate reflects that.
[2] "One of these European Court rulings (SiMAP) holds that hospital doctors may count hours spent asleep on call as working time. The other (Jaeger) says that they are entitled to immediate compensatory rest for any resident on-call duties, even if they have been able to rest. The first might be a basis for improvements over time. The second just doesn't make sense.", see http://www.parliament.uk/parliamentary_committees/lords_press_notices/pn080404bg.cfm
[3] CBI press release, 10 September, 2008, http://www.cbi.org.uk/ndbs/Press.nsf/38e2a44440c22db6802567300067301b/d6d6e007b3649b13802573f40037b617?OpenDocument
[4] BERR, 10 June, 2008, http://nds.coi.gov.uk/environment/fullDetail.asp?ReleaseID=370054&NewsAreaID=2&NavigatedFromDepartment=True
[5] House of Lords EU Committee, 21 October 2008, http://www.publications.parliament.uk/pa/ld200708/ldselect/ldeucom/170/170.pdf
[6] http://blogs.telegraph.co.uk/richard_tyler/blog/2008/06/11/britains_victory_in_48_hour_week_optout
[7] Agence Europe, 7 November, 2008.
[8] Press release from the European Parliament, 5 November, 2008, http://www.europarl.europa.eu/news/expert/infopress_page/048-41251-308-11-45-908-20081103IPR41250-03-11-2008-2008-false/default_en.htm
[9] Euractiv, 6 November, 2008. http://www.euractiv.com/en/socialeurope/business-furious-meps-scrap-working-time-optouts/article-176998?Ref=RSS
[10] Financial Times, 3 November, 2008.
[11] Financial Times, 3 November, 2008.