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My Lords, I should like to use the opportunity afforded by this debate on the humble Address, with its particular emphasis today on the matter of equalities, to consider an issue that was not directly mentioned in the gracious Speech but may well be considered among those other measures that will have to be considered by Her Majesty’s Government during this Session. That is the question of gender equality on the boards of publicly listed companies, which is currently being considered by the European Parliament. A directive was considered by your Lordships’ European Union Sub-Committee B during the previous Session, and a report on that matter and the sub-committee’s consideration of it was debated in your Lordships’ House. At this point, I remind noble Lords of my interest as a member of that sub-committee.
The directive proposes that a quota will be set at 40% to ensure that there is gender equality on the boards of publicly listed companies within the European Union, and that, if companies fail to achieve that, sanctions will be applied against them. There is no doubt that achieving gender equality on the boards of publicly listed companies is vital. Much work has been done on that matter. Indeed, the report of EU Sub-Committee B clearly highlighted the vital loss of talent if women are not appropriately appointed to the boards of publicly listed companies.
A reasoned opinion was sent from your Lordships’ House and, indeed, from the other place, to European institutions in November last year, because serious concerns were raised about the nature of the directive and, indeed, a potential infringement of subsidiarity. The use of the reasoned opinion—the so-called yellow card—is a mechanism defined in the Lisbon treaty that provides for a test by Parliaments, rather than by Governments, of subsidiarity issues. The yellow card, which was the first stage in that subsidiarity test, required nine Parliaments in the European Union to send a reasoned opinion raising subsidiarity concerns. Regrettably, only six did so, so the mechanism to test subsidiarity failed.
Other concerns were also raised in consideration of the proposed directive with regard to whether the European Union had demonstrated that there was European added value by having a directive at European level mandating a 40% quota, rather than national Governments taking action themselves. There were also serious concerns about whether it was legal in European terms for this type of sanction to be applied against publicly listed companies if they failed. Nevertheless, the ability of that part of the subsidiarity test procedure to achieve a resolution of this matter had failed.
Moving forward, two committees of the European Parliament are now considering the directive and eventually it will come back to the Council of Ministers to be finally considered, approved and then sent to national Governments for transposition into domestic legislation. However, a serious concern arises with regard to the broader approach that our country has taken towards equality legislation. The Equality Act 2010 permits positive action but defines positive discrimination as unlawful and considers a number of potential situations of positive discrimination, of which one is the setting of quotas; that is made very clear in the Act. Under those circumstances, if the directive was agreed by majority voting at the Council of Ministers and returned to this Parliament for transposition, how would Her Majesty’s Government deal with setting a quota in domestic legislation, which would appear to be contrary to the terms laid out in the Equality Act 2010 as it represents positive discrimination?
Serious concerns arise beyond the important issue of ensuring gender balance on the boards of publicly listed companies. If a quota were to be established for that, would it undermine the standing of equality approaches and positive action in other important areas of equality legislation in our country, given that there is no quota for those issues but there is for gender balance on boards? That could have a serious undermining effect. Would the transposition and adoption of this directive into domestic legislation require a change to the Equality Act 2010 to ensure that setting quotas is no longer defined as unlawful in that Act? Indeed, might other measures be required? One possibility is to have a period during which a quota is allowed to apply. This is certainly the case with regard to the Sex Discrimination (Election Candidates) Act 2002, which permitted all-female lists for parliamentary elections, European elections, certain local government elections and elections to the Welsh Assembly and the Scottish Parliament, but had a sunset clause which ensured that that provision ended in 2015. However, it was extended to 2030 under an amendment to the Equality Act 2010.
My reason for raising this issue now is that during this Session of Parliament it will have to be considered once again either by committees of your Lordships’ House or, indeed, by both Chambers of Parliament. Will the Minister provide further guidance on the approach Her Majesty’s Government propose to take to this important issue?