Policy Pulse 21: P&O
The policy response to P&O's shenanigans has been energetic, but will it be successful?
There was much political grandstanding around P&O Ferries’ decision to make a large proportion of its seafaring workforce redundant, and hire in cheaper agency workers to replace them (this article will call them P&O for ease from here on, though it’s not strictly accurate). It was blatantly illegal, and P&O made no bones about it. But a month or so later, what has been the policy upshot? Wheels are still very much in motion, but the reaction from the Government has been interesting.
Grant Shapps, Secretary of State for Transport, has been leading the Government’s response, and while it has involved a fair amount of political dickswinging it also shows the difference that an active, energetic minister can make: I can imagine Michael Gove leading a similarly active response, but would we expect the same from, say, Dominic Raab or Jacob Rees-Mogg? This article will run through what Shapps has set out to do, and we will see that in practical terms he is heavily constrained: in some areas, his ability to act is restricted by international law and conventions; in other areas, the fact that the company in question is willing to pay regulatory penalties as a cost of doing business renders the penalties fairly useless. It’s also the case that since 2010 the Coalition, and later majority Conservative governments, set out to weaken employment protections rather than enhance them (for instance extending the qualifying period for unfair dismissal from one year to two, and removing legal aid for such claims). Those changes mostly weren’t crucial in this case, but have obliged Shapps to be seen to be acting against the general direction of government policy for the last decade.
Interestingly, the response to the P&O kerfuffle started off in the Department for Business, Energy and Industrial Strategy, which is also responsible for employment status and rights (not the Department for Work and Pensions, whose name is a false friend here). On March 18th, it was Kwasi Kwarteng and his junior minister Paul Scully to wrote the first outraged letter demanding answers from P&O boss Peter Hebblethwaite.
However, by March 30th it was Grant Shapps who was making a statement to the Commons on the Government’s overall response. I don’t think this is necessarily grounds for criticism: like many issues, this one straddles departmental boundaries, and that it as has found a home with a department keen to act is probably a good thing, not a problem – provided, of course, the Department for Transport is able to co-ordinated with other departments, and does not try muscling in on policy areas where it lacks expertise.
Shapps’s speech outlined an array of steps that the Government intends to take: it certainly adds up to an energetic and inventive response, but will it be effective? And to what extent is he actually proposing new and meaningful policy changes?
Perhaps the most high profile action taken has been to impound two of P&Os ferries after they failed inspections by the Maritime and Coastguard Agency (MCA). The failures appear largely to have arisen from new crew being insufficiently familiar with equipment and procedures, and necessary checks and documentation being incomplete. However, on the surface these appear to have been routine inspections, which suggests P&O’s redundancies programme always risked consequences of this sort: the MCA publishes a list every month of foreign-flagged ships detained after failing inspections, and the two P&O ships were among five on March’s list.
However, P&O have accused the MCA of applying the rules unusually stringently: does this indicate that there is a culture of lax enforcement of these checks, or is it just bleating by P&O as part of its rearguard PR exercise? Either way, Shapps has, “asked the Maritime and Coastguard Agency to review their enforcement policies, checking they are fit for purpose now and into the future.” However, the two ships had already been detained by the time he made his statement; at the time of writing, on ship (the European Causeway) had been released, but the second (the Pride of Kent) was still detained, having failed a further round of inspection.
An area that Shapps gave a lot of attention to was the minimum wage, opening his statement by saying that HM Revenue and Customs would be “dedicating significant resource” to compliance among ferry operators. However, the detail later in the statement acknowledged the position is much more complicated than this made it sound. International conventions governing maritime law would make the changes Shapps had wanted to the Minimum Wage Act unenforceable, so he hit on another approach: he announced plans for legislation to grant UK ports the power to refuse entry to ships that do not comply with UK minimum wage rules. My first reaction to this was that surely outsourcing enforcement to the ports would be difficult to make work, and a burden they would not want. I was right: the British Ports Authority responded by saying, “ports are not the competent authorities to enforce rules on employee salaries or working conditions,” and that, “the expectation that port authorities will need to enforce minimum wage rules in the shipping sector could be unworkable.” Shapps declared his intent to write to ports asking them to enforce the new approach even before legislation was passed, but it seems unlikely that they will (and I’ve not seen any reports that they have).
Potentially more effective may be an effort at bilateral collaboration with other countries to set up “minimum wage corridors” in which, presumably, both countries would commit to enforcing their respective standards on each other’s seafarers. Shapps lists France, Denmark, the Netherlands, Ireland and Germany as countries he has discussed the idea with, to what he describes as a “very very positive” response. So far I’ve not seen any further detail on firm action, but will be glad to be pointed towards it if readers have seen any.
A further measure that appears not to be specific to seafarers, but could have implications for many unfair dismissal cases, is a proposed new statutory code to cover situations of large scale redundancies where the employer has not made reasonable efforts to reach agreement through consultation. Under the code, employment tribunals would be able to take into account the manner of the redundancy, and apply a 25% uplift to compensation awarded. This is clearly aimed at P&O’s approach of offering a generous severance package in order to dispose of its unwanted workers without tribunal cases, even though its decision not to hold a 45-day consultation was plainly illegal. However, although it offered packages beyond the value of what a tribunal could award, might it still have done the same if this new rule had applied, even at 25% more cost? Others have suggested that a more effective mechanism for dealing with these situations would be to allow injunctions to be taken out requiring a 90-day consultation, and making dismissals of this sort effectively impossible. There is no indication that the government will introduce any measure of this sort.
The statement also carried a clutch of rather token-looking measures. Shapps has written to the Insolvency Service (though I could not find the letter published anywhere) asking it to consider disqualifying Peter Hebblethwaite as a company director. The Service has issued a brief statement saying it is investigating the P&O business, and therefore can’t say anything else at all for now. Also in this hard-to-evaluate basket is an effort to make it more attractive for ships to be operated under a British flag, and therefore within the scope of British employment law; however, the only firm action taken to do this is reform to tonnage tax, so it remains to be seen whether this will really be enough to get more ships, and therefore seafarers, under the British flag.
Overall, Shapps’ instinct to act vigorously over P&O’s actions is probably a sound one in terms of both the policy and the politics of the situation. Even the trade body that P&O belongs to, Maritime UK, has distanced itself from the mass redundancies. However, whether this hotch-potch of measures, mainly targeted at policy areas outside the DfT’s purview, will be adequate to prevent similarly cynical gambits in the future has to be open to question. Achieving that might require a more thoroughgoing approach to this whole policy area, perhaps by a government more comfortable with firm regulatory action.
Policy Pulse 21: P&O
A thorough analysis as usual John. It would have been even better if you had referred to P&O Ferries though. They are not the same company as P&O. The former are owned by DP World, the latter Carnival https://en.m.wikipedia.org/wiki/P%26O_(company).