UK government plans to revamp holiday pay calculation for part-year workers
Out-Law Analysis | 05 Sep 2022 | 11:38 am | 7 min. read
The first month of Liz Truss’ premiership will reveal a lot about how policy will evolve in the UK under her leadership.
Precisely what action Truss will take to address rising inflation and promote growth should become clear from major set piece events such as a likely emergency budget and her speech at the forthcoming Conservative Party conference.
Tax changes and regulatory reform are expected to be high on the agenda.
Truss was elected leader of the governing Conservative Party on Monday following an eight-week leadership contest, defeating former chancellor Rishi Sunak in a vote among party members. She is expected to be formally confirmed as the next prime minister on Tuesday 6 September, with a meeting with the Queen scheduled to take place at the Balmoral estate in Aberdeenshire.
Upon returning to London, and as has become custom, Truss is expected to deliver a speech on the steps of Downing Street setting out her vision for the country. Detailed policy is unlikely to be outlined in the speech, but it should provide a high-level indication of the priorities her government will pursue.
Thereafter, Truss will set about appointing her Cabinet, ministerial team and advisers – decisions that will offer clues to businesses about the direction of the government.
On Wednesday, Truss will face Labour leader Sir Keir Starmer at Prime Minister’s Questions in the House of Commons in her first parliamentary test as prime minister.
Unlike in a general election campaign, when parties seeking election will set out their policy priorities in a manifesto, the candidates for leadership of the Conservative Party did not produce manifesto commitments. However, it is possible to anticipate some of the policies Truss’ government will pursue from the comments she and her supporters made during the leadership election campaign in appearances at party hustings and before the media.
Much of the immediate policy announcements that businesses can expect are likely to be focused on addressing the cost of living crisis. Truss has already outlined her intention to reverse the rise in national insurance contributions that Rishi Sunak imposed as chancellor, while she has also said she would scrap the planned rise in corporation tax rates to 25%, which is currently scheduled to take effect next year.
Rising energy prices are exacerbating concerns over the cost of living crisis. Energy regulator Ofgem announced on 26 August that the energy price cap would rise from just under £2,000 a year to £3,549 per year, with forecasts suggesting it will rise further – above £5,300 – in January 2023. During the campaign Truss said that no decisions on financial support would be taken until after the leadership contest.
Sir Keir Starmer has said the Labour Party would freeze the energy price cap for residential properties at current levels – a move he claims would save households around £1,000 on their bills. Truss is under pressure to confirm what her government will do in response.
Scottish Affairs and Devolved Nations Lead
It is widely expected that much of the detail of Truss’ plans will be outlined in what has been described as an ‘emergency budget’ within the first few weeks of her premiership
Truss has said that she would place a temporary moratorium on the so-called ‘green levies’ from energy bills to reduce bill rises for two years. It has been estimated that this would save households around £150 a year on average.
What the Truss government will do to help businesses cope with their rising energy bills is also likely to come under scrutiny. Some businesses have already announced their closure in response to increased energy costs, while some businesses in the hospitality sector have indicated that they could close their businesses temporarily over winter months to avoid higher bills.
It is widely expected that much of the detail of Truss’ plans will be outlined in what has been described as an ‘emergency budget’ within the first few weeks of her premiership. This is expected to take place before parliament enters party conference recess on 22 September. It has been reported that Truss is considering income tax cuts and reducing VAT to address pressures on consumer spending.
Truss’ plans for an emergency budget have been criticised by some political opponents who believe fiscal measures should be subject to scrutiny by the independent Office for Budget Responsibility before they are implemented. The Institute for Fiscal Studies has suggested that Truss’ tax and spending plans may hit public finances.
Another priority of Truss’ government is expected to be deregulation. A Bill aimed at reducing legislation on the UK statute book that has its origins in EU law is widely expected to be published soon. Specific legislative reforms that have already been initiated in this regard – including those relating to data protection and medical device regulations – are also expected to be progressed.
Truss’ long-term vision for the country is unclear at this stage, but policy direction can be gleaned from her stated political ideology.
Together with other senior members of the Boris Johnson government, including home secretary Priti Patel and justice secretary Dominic Raab, Truss and Kwarteng authored a book in 2012 – ‘Britannia Unchained: Global Lessons for Growth and Prosperity’ – which is widely perceived as endorsing Thatcherism.
If Truss pursues that ideology, businesses can anticipate greater outsourcing of functions currently performed by the state.
However, Truss’ long-term plans are likely to become clearer when she delivers her speech at the Conservative party conference, taking place in Birmingham between 2 and 5 October.
Businesses will also get a sense in the medium term for the Truss government’s appetite to pursue legislative reforms that have been proposed that would add regulatory burdens to businesses, such as the Online Safety Bill.
Businesses can also expect Truss to move forward with the levelling-up agenda – a flagship initiative of the Johnson government. She has said she would create low tax zones with lower businesses rates and fewer planning restrictions in left-behind areas to encourage investment, and amend the Levelling Up Bill to replace centralised local authority housing targets with tax cuts and reduce red tape in “opportunity zones” to make it easier and quicker for developers to build on brownfield land in those areas. Truss has also said she would reverse the decision to downgrade the Northern Powerhouse Rail project, which she has pledged to deliver in full.
Truss’ approach towards planning reform will also be of significant interest given she has previously advocated for a more flexible, simpler planning system. Recently, the government set out fast-track planning route to speed up major infrastructure projects, but the ability of the Truss government to support major infrastructure projects – widely accepted as an enabler of economic growth – with public funds is likely to be dictated by the extent of the financial package she signs-off on for addressing the cost of living crisis, as well as continuing geopolitical events: the war in Ukraine has driven rising energy costs and there have been recent predictions of a ‘second wave’ of cost rises in building materials and labour.
However, the Truss government is expected to proceed with supply side reforms, including reforming Solvency II and The Markets in Financial Instruments Directive (MiFid) regulations to encourage investment in British infrastructure, energy projects and the high-tech industry.
Truss has also pledged to legislate for minimum service levels on critical national infrastructure in the first 30 days of taking office, raise the ballot threshold for union strike action from 40% to 50% of employees, and increase the minimum notice period for strike action from two to four weeks.
Energy security, and how best to achieve it, is high on the political agenda given the war in Ukraine. The debate is not taking place in isolation, however. Rising energy prices, which stem from countries seeking to reduce their dependence on Russian fossil fuels and stockpile supplies ahead of the winter in Europe, are impacting discussion on longer term energy policy and how to avoid such cost pressures in future. Energy policy is also being shaped by the continuing climate crisis, with extreme weather events occurring more regularly and presenting an existential threat in the longer term to people, property, and trade.
Though she has said she would place a temporary moratorium on the so-called ‘green levies’ from energy bills for two years, Truss has committed to the UK achieving its target of ‘net zero’ greenhouse gas emissions by 2050 and other actions in the Conservative Environment Network pledge.
The UK’s revised energy security strategy, updated earlier this year, envisages a role in the UK’s energy mix for a range of energy technologies. The delivery of nationally significant energy infrastructure projects in future is likely to be supported by reforms to planning policy that the Johnson government has initiated and which the Truss government is likely to finalise.
In the shorter term, Truss is expected to act quickly upon taking office to approve a series of oil and gas drilling licences in the North Sea, inviting applications for as many as 130 drilling licences to explore new fields.
Truss has also confirmed that she would lift the ban on fracking, leaving it to local residents to decide whether fracking takes place in their area.
We also expect the Truss government to review the EU's habitat directive and develop a biodiversity target focused on the animals and plants endangered in the UK.
First minister Nicola Sturgeon has confirmed her intention to hold a second independence referendum in October 2023, citing recent election results for pro-nationalist parties and a change in circumstances brought about by Brexit as a mandate for another vote.
Westminster legislation paved the way for the 2014 referendum, but Liz Truss has indicated that she is not willing to countenance a repeat this time and even went as far to say she will “ignore” Nicola Sturgeon. The UK Supreme Court is scheduled to hear arguments on the Scottish Parliament’s competence to legislate for a referendum on 11 and 12 October. If the court rules against the Scottish government, Sturgeon has indicated that she will approach the next general election as a de-facto referendum on Scottish independence.
The prospect of another Scottish independence referendum creates a degree of uncertainty for businesses at a time when Truss is likely to want to encourage investment to stimulate the UK economy.
UK government plans to revamp holiday pay calculation for part-year workers