In a striking twist of British politics, the historic and often criticised House of Lords has emerged as a formidable defender of business interests against the new Labour government's legislative agenda. As 2025 draws to a close, peers are using their revising powers to challenge policies they argue could severely damage the economy, most notably the controversial Employment Rights Bill.
The Unlikely Guardians: Peers Push Back on Costly Reforms
With Labour holding a commanding majority in the House of Commons, effective opposition has been limited. Conservative MPs and backbenchers, many newly elected in 2024, have struggled to alter the government's course. This has left a constitutional gap filled unexpectedly by the upper chamber. The Lords, a body often seen as an archaic relic, is now where significant legislative battles are being fought.
The flashpoint is the Employment Rights Bill. Just last week, peers backed an opposition amendment demanding a review of plans to abolish the cap on compensation for unfair dismissal. Critics, including Conservative shadow ministers, warn the change would create a "recipe for the rich" and wreck justice for ordinary workers. While trade unions accuse the Lords of defying public will, the policy was notably absent from Labour's 2024 election manifesto.
A Staggering £5bn Price Tag and 'Insufficient Detail'
The government's own impact assessment paints a alarming picture. It estimates the bill's measures could impose up to £5bn in annual costs on businesses, a sum that threatens growth and job creation. The Institute for Fiscal Studies suggests up to 80% of these extra costs could ultimately be passed to workers through lower wages.
Furthermore, the Office for Budget Responsibility highlighted a critical problem in last month's Budget. It could not score the bill's impact on productivity or growth due to "insufficient detail" from the government. This lack of clarity has given the Lords firm ground to demand amendments and seek to limit the burdens on enterprise.
This scrutiny has exposed a wider issue in law-making. The bill was so poorly drafted that the government itself later proposed 200 pages of amendments to its own legislation, underscoring the vital revising role the second chamber plays.
A Chamber of Experience Versus a Commons of Novices
Constitutionally, the Lords is hard to defend. It is oversized, its members have life tenure with no attendance requirement, and its composition includes political appointees, bishops, and hereditary peers. Yet, its very anachronism has created a unique pool of expertise.
While Labour's frontbench in the Commons contains many with scant private sector experience, the Lords is rich in it. The chamber boasts entrepreneurial founders, former investment bankers, and sitting FTSE 100 CEOs. This reservoir of real-world business knowledge strengthens the legislative process, allowing scrutiny to step outside narrow partisan politics.
For now, despite Labour's long-standing policy to abolish the Lords, the business community has found an unexpected and powerful ally in the gilded corridors of the upper house. As legislative battles intensify, this unelected chamber is proving its worth as a crucial check on government power.
