14 August 2023

Seven years after the referendum, the UK is still in thrall to EU regulation


Looking through the Retained EU Law Dashboard is a dispiriting experience. The Dashboard is the Government’s list of  EU laws and regulations which we kept on to ensure legal continuity after Brexit. There are over 4,800 edicts on the list, and this is probably an underestimate of the total. Successive trawls of government records have revealed more and more examples, and the process is ongoing.

The length of that list is testimony to the EU’s endless appetite for regulation. Pages of pension regulations, orders about environmental designation in the tributaries of the Upper Thames, detoxification of animal feed – all human, and indeed non-human, life is there.

The point about all this stuff is that none of it was initiated by the UK government, and it rarely received any sort of scrutiny in Parliament. In the Government’s own words, “pieces of direct EU legislation…were ‘cut and pasted’ onto the UK statute book”.

One example I have come across concerns the detail of paid holiday entitlement. Until the 1990s there was no general entitlement to paid holidays, although the vast majority had some holiday rights as part of their contract. The EU’s Working Time Directive changed this. Although the Major government was opposed and refused to ratify it, paid holidays for all eventually became law after Tony Blair’s government signed up to the Social Charter. Interestingly, the Directive required four weeks’ paid leave. As on so many occasions, however, we ‘gold-plated’ this by requiring 5.6 weeks, taking into account bank holidays.

The Working Time Directive was certainly discussed and debated in Parliament. Although there are still live issues about the application of the 48-hour maximum working week, and how it should be interpreted, there has been no real demand to revoke the holiday entitlement. 

That’s understandable enough, and it would be a very brave politician who went into bat for taking away people’s holiday pay. However, as with so many of our ‘laws’, the scope of the legislation was extended by court decisions to areas which are more problematic.

European Court judgements led to a situation where people on sickness absence continue to build up entitlement and carry it forward for up to 18 months if they can’t or don’t wish to use it immediately. The ECJ also determined that an employee on sickness absence could go on holiday during this absence and then return to sickness status. While there might conceivably be circumstances where this makes some kind of sense, to most people this probably seems bizarre. If you’re fit enough to go on holiday, why are you not fit enough to return to work? This was never something determined by our legislators, to whom representation could have been made. Employers just had to accept it.

This is far from a trivial issue. Last year, the national Sickness Absence Rate was at its highest level since the early noughties. We lost over 185 million working days to sickness, about 90 times the days lost through strikes. Absence through sickness was also 56% higher in the public sector than in the private sector, which may tell us something.

Given sharply rising sickness absence – most of which is for self-reported minor illnesses, back pain and stress – perhaps we should look at the incentives which may be contributing to this trend. Revoking the ability to build up holiday entitlement when not working is one minor adjustment we could make.

The ostensible reason for the Working Time Directive, it should be remembered, was to ensure employees were given time to rest and recuperate – both on a daily and weekly basis, and in terms of longer rest periods for holidays. It was to preserve their health, but also to prevent people working excessive hours from endangering the public, for instance in transport or medical care. It was never meant to be a general perk. Like all employment mandates, of course, it is ultimately largely paid for by workers in terms of lower pay.

On these health and safety grounds, it is not obvious why someone has been on an extended period of sickness absence needs to take a holiday as well. Employers complain that they are sometimes faced with employees who have been on a long sickness absence and are expected back, but then announce they will be taking several weeks holiday. This creates knock-on problems, for example extending the contracts of temporary replacements who may have now moved on. And those who take their holiday and then return to sickness absence create complicated administrative problems.

What about the financial cost of holiday entitlement accrued during sickness absence? That’s difficult to estimate, but simply calculated on the basis of cost of holiday days accrued, paid at the average earnings rate, I’d put the figure at £250-300m at least. With other costs it could well be higher.

Incidentally, similar arguments apply to maternity leave. European Court rulings made it clear that mothers build up holiday entitlement throughout the period when they are not working. This adds to the uncertainty employers already face about dates of return, given the caution discrimination law requires them to exercise when asking mothers about this.

The example of holiday entitlement is just one of many thousands of decisions taken without proper debate, imposed on the UK by European rulings. It’s also an example of drift from the main justification for a law – rest and recuperation – to a financial benefit. Whether or not you think these rulings should be reversed, they should at least be properly discussed rather than, like so many ‘laws’, simply carried forward post-Brexit.

The Retained EU Law (Revocation and Reform) Act allows us to fillet out things like this. It’s a thankless task, but those who are concerned with the thousands of minor rules which tie down business need to get stuck in rather than simply pontificating.

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Professor Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.