Clause 73

Equality Bill – in a Public Bill Committee at 11:45 am on 23 June 2009.

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Gender pay gap information

An amendment to reduce the number of people an organisation must employ in order to be subject to the gender pay gap clause requirements.

Photo of Joe Benton Joe Benton Labour, Bootle

With this it will be convenient to discuss new clause 23—Gender pay gap information (No.2)—

‘(1) Subject to the provisions of this section, no less than every three years a designated employer shall publish information relating to the pay of its employees for the purpose of showing whether there are differences in the pay of male and female employees.

(2) The information relating to pay which a designated employer shall publish includes—

(a) the average hourly pay of male workers and the average hourly pay of female workers within its employment;

(b) in respect of each role within the organisation—

(i) the average pay awarded to workers engaged in the role;

(ii) the percentage of men and women engaged in that role;

(iii) the gap, if any, between the average hourly pay of male and female employees in that role; and

(iv) the average length of service of men and women engaged in that role;

(c) information identifying—

(i) any descriptions of activities carried out in the course of employment with the employer by any group of workers who are wholly or mainly women;

(ii) any descriptions of activities carried out in the course of employment with the employer by any group of workers who are wholly or mainly women;

(iii) the relative values of the descriptions of activities falling within sub-paragraphs (i) and (ii); and

(iv) in relating to descriptions of activities within sub-paragraphs (i) and (ii) which are judged to be of equal value to each other, the average hourly pay of male workers and average hourly pay of female workers carrying on those activities.

(3) For the purposes of this section, “pay” means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or kind, which the worker receives directly or indirectly, in respect of his employment, from his employer and includes the cost to the employer of—

(a) any pensions contributions paid by the employer in respect of the worker,

(b) any bonus or other performance related or incentive payment, and

(c) any discretionary benefit granted to a worker in connection with his or her employment.

(4) The Secretary of State shall prescribe by regulations any further information which employers must publish pursuant to subsection (1), the form in which the information must be published, and the degree of publicity to be made.

(5) In make such regulations the Secretary of State shall adopt best practice for promoting awareness of the nature and causes of any pay gap between persons of different genders as set out by the International Labour Organisation from time to time.

(6) The Secretary of State shall consult with the Equality and Human Rights Commission as to how to ensure that the regulations shall contain best practice prior to the making of the first regulations and no less than every five years thereafter and shall amend the regulations as necessary to ensure that best practice is maintained.

(7) Where an employer fails to publish information in accordance with this section then an employer shall not be entitled to submit a material factor defence in accordance with section 64 in relation to any period for which they are in breach of their obligations under this section.

(8) Where the information published by an employer reveals that there is a difference in the average pay of men and women doing relevant types of work as set out in section 59, then in any proceedings to enforce a sex equality rule or a sex equality clause it shall be presumed that there is such a breach unless the employer can show a material factor defence.

(9) The regulations may make provision for a failure to comply with the regulations—

(a) to be an offence punishable on summary conviction by a fine not exceeding level 5 on the standard scale;

(b) to be enforced, otherwise than as an offence, by such means as is prescribed.

(10) The reference to a failure to comply with the regulations includes a reference to a failure by a person acting on behalf of an employer.

(11) An employer shall publish information pursuant to subsection (1) within one year of the coming into force of this Act.

(12) Where an employer (A) is able to determine the terms and conditions of employment as between another employer (B) and its employees, A shall publish the information that B would otherwise be required to publish in a way which is consolidated with the information for all other employees of A whose terms and conditions A may determine, and where A publishes consolidated information B shall not be in breach of this section if it does not publish any information.

(13) A designated employer means an employer who has more than 100 employees.’.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families)

The amendment is designed to probe the Government on the decision that they have made on the number of employees that an organisation must employ to be subject to the gender pay gap clause requirements when they arise. The Government refer to 250 employees in the private sector. I do not fully understand why that number has been selected. In our evidence session, reference was made to a reduced number. Women Like Us said that organisations with 100-plus employees often have dedicated human resource departments or facilities, so issues would not be too onerous as such departments should be able to contribute their experience of auditing. It was also said that the reference to 250 employees leaves out of the gender pay audit requirement a huge proportion of businesses in the United Kingdom. About half the people in the United Kingdom are employed in businesses with fewer  than 250 members of staff, so huge sectors of the population would not be provided with protection under the Bill, when the regulations come into force. Given that 80 per cent. of the population are not employed in the public sector, will the Minister explain why the figure of 250 employees has been chosen?

I am saving some remarks to the end of the debate, but I now move to new clause 23. It would extend the period for publishing information to three years. That is a reasonable timetable. It would not be too onerous, nor would it be so irregular as to be out of date. Subsection (2) of the new clause deals with the information that must be published and would distinguish the differentials between male and female pay in an organisation. The information published under paragraph (c) would highlight discrimination in the types of work undertaken wholly or mainly by women so that we can see what is being done and by whom, how that work is valued, whether it is of equal value and whether the pay demonstrates an unjustified differential or a legitimate aim subject to the defence of a material factor.

In our evidence session, we heard from the Fawcett Society that, if we are to eradicate discrimination and unequal pay, we have to evaluate the skills and experience that are required for jobs and check whether individuals in equivalent jobs are being paid equivalent salaries. That is why new clause 23 proposes publishing both the levels and types of work. Women’s work is often undervalued and major cases have involved equal value in the public sector. That undervalue has delivered low pay for women for decades. It has not been adequate simply to have provisions that make that illegal, which is why pay audits are necessary they make sure that checks are in place so that people are not discriminated against.

It is only by seeing how people are treated compared with others at levels and types of work that we will ever be able to bring a case to a tribunal to right those wrongs. If we cannot find that out, the gagging clauses that we referred to earlier, while they are extremely welcome and helpful—for which I say, “Well done” to the Government—will not give the overall picture to enable an individual to make a judgment about a company’s relative pay or jobs.

The Conservative amendment of only imposing mandatory pay audits when there is a finding against a company will not work. It seems to be logical to punish when there is something judged to be punishable, but the reality is that such a policy will not address unequal pay because the individuals cannot get the evidence to bring the matter to a tribunal to get the judgment. As I understand it, the company would be required to publish mandatory pay audits thereafter. That will not address the issue in the first place. It will not provide the evidence.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills) 12:00, 23 June 2009

I point it out to the hon. Lady that we have not tabled, or had selected, an amendment that goes through Conservative policy. She is right to say what Conservative policy is, although obviously we would disagree about her analysis of its shortcomings, but we cannot necessarily enter into a debate on what she is saying without an awful lot of latitude from the Chair, because no such amendment is selected for debate.

Photo of Joe Benton Joe Benton Labour, Bootle

Order. My mind was going along that avenue. We have been straying a little from amendment 248 and new clause 23. Perhaps we can confine ourselves to them. I shall allow the widest debate I can, but we are dealing with those amendments.

Photo of Evan Harris Evan Harris Shadow Science Minister

On a point of order, Mr. Benton. I think that my hon. Friend is setting out a different approach to pay audits and contrasting it, quite reasonably, with the Government’s approach. I must say I wondered to what extent she might refer to alternative approaches, in proposing her new regime, which is supported by the Liberal Democrats.

Photo of Joe Benton Joe Benton Labour, Bootle

I have indicated that I am prepared to allow the broadest possible debate, but I want to sound a cautionary note about constant references to a Conservative amendment that is not going to figure anywhere.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families)

Thank you, Mr. Benton. I merely wanted to say that any such idea would not provide the same rigour as mandatory pay audits, which can be viewed by an individual to reveal whether there is discrimination against them in pay level, work type or conditions, or more widely.

Subsection (3) of the new clause deals with packages in connection with pay. Those are often left out of such debates. The subsection would introduce the idea that the entire package, not just the pay itself, should be considered. I looked at the issue with reference to Cambridge university, and it was clear from its pay audit, which was published voluntarily, I believe, that men were being offered much better packages, including such things as accommodation and moving costs, to bring them to the job, whereas women on the same pay grade, perhaps, were not being offered such packages. That is discrimination.

In one establishment, where most market supplements for higher grades were for men, one administrator was getting 125 per cent. of salary as a market supplement. That is back-door discrimination, and we want that eradicated. It operates outside pay levels and work type, but is to do with the package that goes with getting the job. I am using that only as an example of the sort of discrimination that can happen outside the pay level. Subsection (3) would require publication so that any such bias inherent in a company would be made transparent.

Subsection (7) of the new clause would provide teeth, so that action could be taken if there was failure to publish. An employer who failed to publish would lose the right to use or submit the material factor defence for the period in which there was failure to comply with the requirement.

Those are the essential points of the new clause, apart from the fact that it would define a designated employer as one with more than 100 employees, referring back to amendment 248. I shall be pleased and interested to hear what the Minister has to say.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I applaud the hon. Lady’s instinct in tabling the two amendments, even though I suspect that we would disagree strongly about the means and mechanisms. It is important to put it on record that I hope and expect Committee members from all parties  to share the common goal—I am sure that we do—of reducing and eliminating the gender pay gap by whatever means necessary.

However, we disagree with the hon. Lady’s proposed mechanisms. Although a degree of employer-based discrimination is clearly part of the gender pay gap, most analyses also make the valid point that a number of other important factors are at work. It is important not to pursue or base legislation on the notion that employers are the only cause. It is also necessary to ensure that any means that we take to drive through reduction of the gender pay gap are proportionate.

With your permission, Mr. Benton, I will expand on our concerns during clause stand part debate, but we contend—I think that the Government’s own analysis supports this—that the gender pay gap has many other causes, which have to do with disadvantage in society in everything from access to education and onwards. However, within companies where differentials exist between men’s and women’s pay, any direct discrimination must clearly be dealt with vigorously and strongly. That is why, during our debate on clause 72, the hon. Lady and I both emphasised our support for measures designed to ensure that it is illegal to have a contract term that stops men and women in the same company communicating about their pay. That is an important mechanism. However, there are many other reasons why pay differentials might exist in the same company. For example, women might not be well represented at senior levels. That would inevitably lead to differentials.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families)

I believe that the hon. Gentleman made the same point to the panel during the evidence session. When the Fawcett Society was asked how much of the pay gap could be laid at the door of discrimination by businesses rather than other factors, it was extremely robust, saying that

“when people have decomposed the gender pay gap to look at the different elements that contribute to it, discrimination is the largest factor of all”.——[Official Report, Equality Public Bill Committee, 2 June 2009; c. 57, Q114.]

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I am glad that the hon. Lady brought that up. Although the Fawcett Society witnesses did not mention which document they were referring to, they might have been referring to a research finding from the Equal Opportunities Commission on modelling gender pay gaps, which says that the largest single underlying cause of gender pay gaps, at 38 per cent., is

“due to other factors associated with being female, including direct discrimination and differences in the labour market motivations and preferences of women as compared with men. Some of this will be attributable to indirect discrimination or systematic disadvantage”.

The Fawcett Society was right to say that the largest single element includes direct discrimination. However, it is not true to say, and I do not think that the Fawcett Society was saying, that the largest single element is direct discrimination. That 38 per cent. includes several other crucial factors, which previous Governments have addressed, and the current Government, and I hope future Governments, will continue to address via different mechanisms. Frankly, those factors should not be addressed via discrimination. It is not necessarily true to say that direct discrimination is the largest factor. In fact, in all probability it will be only a subset of 38 per cent.

Photo of Evan Harris Evan Harris Shadow Science Minister

Even if we accept that it is not the largest factor, given that the hon. Gentleman said that like previous Governments, this Government and future Governments want to tackle everything else, there seems to be no good reason not to seize the opportunity set out in my hon. Friend’s new clause to tackle that component. It is only justifiable not to do so, or to seek to do so in a weaker way, if they do not think that it is a problem. To leave out employers from the package of measures is in itself disproportionate—it is out of proportion because there is a problem and no solution is being proposed, or not a strong enough one. That is where the disproportionate consideration comes—not that this measure is disproportionate.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I thank the hon. Gentleman for, I think, making my point. He is right to say that we cannot ignore direct discrimination by employers and I am sure that everyone agrees with that. That is why the hon. Member for Hornsey and Wood Green and I both rose to make the point on clause 72 about making sure that there is better pay transparency by ensuring that it is illegal for employers to make it a contract term that people cannot discuss their pay with their colleagues at work.

Conservative policy—I will not try Mr. Benton’s patience, but the hon. Lady mentioned it, so I shall illustrate it—is that we believe it is sensible to have pay audits for companies that have been found to be directly discriminating. That is clearly a sensible step to take in such situations. However, our contention is that it is a disproportionate approach to companies that have not been found to be involved in direct discrimination in other cases, because of all the other factors that are also at work.

Photo of John Mason John Mason Scottish National Party, Glasgow East

The hon. Gentleman is setting an almost impossible barrier by saying that, in the first place, discrimination has to be proved, and then there has to be an audit or information has to be provided. Surely one of the themes of the past few weeks has been that providing information is inherently a good thing and if an employer has particular reasons for differences, they could presumably then explain them.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I thank the hon. Gentleman for his intervention. I do not think that the barrier is impossible at all—it is perfectly reasonable. Again, it is important to assess the degree of proportionality: what is the size and cost of the burden that we are imposing to address the particular part of the gender pay gap that we are seeking to sort out? The costs of the hon. Lady’s proposal would be on the wrong side of that line. Our contention is that ours is a modest and reasonable way of balancing the two.

I take the hon. Gentleman’s point that there is a balance to be struck and that is what we are trying to do. That is why I was clarifying our reason for agreeing with the end that the hon. Lady is striving towards and our concerns about the proportionality of the means rather than anything else.

Photo of John Mason John Mason Scottish National Party, Glasgow East

The hon. Gentleman mentions costs. Surely, in this day and age, with computer systems as they are—I have worked in a number of small organisations which have quite sophisticated computer systems—there is not a great cost in providing the information.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

The hon. Gentleman comes on to a point that I plan to make in the clause stand part debate about the Government’s impact assessment. I shall confine my remarks for the moment to quoting a comment which is attributed—although many are—to Jack Welch, former, much celebrated chief executive of General Electric in the States. When he was being presented with a very long and involved set of financial projections by someone from General Electric’s finance department, which involved detailed calculations that were expressed to many decimal points, he looked at the chap making the presentation and said, “Son, I don’t know about the accuracy of those last two digits in that number, but I am pretty sure that the first one is wrong.” I feel that the calculation of the costs of this measure is woefully under-egged, which goes directly to my contention about proportionality.

Photo of Evan Harris Evan Harris Shadow Science Minister

The hon. Gentleman argued briefly that it is legitimate to do the audit work where a case of direct discrimination has been identified. However, if one knows—one does know and we can argue about the degree to which it is a factor—that it is endemic, that is like arguing that people should be advised to eat healthily only after they have had a heart attack. That misses the point of the whole range of people whose health would benefit from that. Will he explain the rationale for such an after-the-fact approach, even if it were to work?

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I would use a different analogy, which is that people, and in this case companies, should be innocent until proven guilty. The hon. Gentleman is right to say that there is a degree of direct discrimination, but by describing it as endemic he is assuming that all companies are guilty of it. That is a dangerous assumption, which is not necessarily supported by any data. A large number of companies have taken enormous steps, and the data that I will quote later—again provided by the Office for National Statistics—will show that there have been real steps in reducing the gender pay gap since the equal pay legislation was first passed. We have still further to go, but it is deeply unfair and inaccurate to assume that all companies are guilty of gender pay discrimination and direct discrimination. There is no evidence for that.

Photo of Evan Harris Evan Harris Shadow Science Minister 12:15, 23 June 2009

Reluctant though I am to go to the dictionary, given what the Minister said previously, medically “endemic” does not mean that everyone has a condition, but that it is widespread and ingrained. The allegation that I said every company is guilty is wrong, and the hon. Gentleman understates the issue by saying that only those found guilty have a problem. He thinks that the problem of the pay gap and direct discrimination has not been a big enough problem for enough people—women—for long enough for more action to be imposed on employers. That is the nub of the political disagreement between us. I suppose that is why we have politics and elections.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I thank the hon. Gentleman for his dictionary definition, which, I hope, makes it clear that he does not think that all employers, or even a majority, are involved in direct discrimination. I hope that he thinks that it is a minority of employers, and a reducing minority. My point is that it is unfair to assume that everyone is guilty until proven innocent.

I would pick up the hon. Gentleman on his attempt to put words into my mouth about the description of Conservative policy. I believe it is important to apply the measures. [Interruption.]

Photo of Joe Benton Joe Benton Labour, Bootle

Order. There is far too much background noise.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

Obviously, we will have a clause stand part debate, so let me not spread my remarks too widely. In relation to the comments of the hon. Member for Weston-super-Mare about all companies being innocent until proven guilty, without a provision such as clause 73 companies would be able to hide their guilt by not disclosing the figures. Surely that is the major policy difference between us—and probably the Liberal Democrats—and the Conservatives. He says that there should be a mandatory pay audit when direct discrimination against someone is proven, but, as we all know, such cases rarely get to court. It is a tour de force to get one, as it requires a lot of courage for a person to be present.

As for the nature of the proposed pay audit after a finding of unequal pay in a tribunal, it would be mandatory for the tribunal to impose the pay audit on the business, even if the case itself had had the effect of making a business put its business right. That would be absolutely onerous on business and is a fatal flaw in the Conservative proposals.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

Will the Minister expand on her comments about the difficulty of getting information about pay inequality? We have just had a brief stand part debate on clause 72, which provides important clarification and transparency. I hope she will accept—I am sure that she does, because it is a Government clause—that that is an important mechanism for improving and introducing transparency in future of the kind that she has described.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

It is a useful tool, as we all agree. The provision is about one-to-one disclosure and is relatively modest. Unequal pay is systemic and we have to find a way of getting it out of the system. Much of the time the only way to do that is to make people disclose that it might be there. If it is not, there is no problem. If it is, they must disclose it so that we can get rid of it, or we simply have no way of getting through. Although that is not the only difficulty with the legislation that we have had since 1974, it is a key one.

It is fine to give someone the right to bring an action for equal pay, but if they do not know that they are suffering from unequal pay, then it is hard to exercise such a right. We have to go way beyond the previous clause, which would allow me to ask the man sitting next to me whether he is getting £10 more an hour than I am. That is obviously a first step, but there is a need for a great deal more transparency across the piece before we can start to tackle continuing pay discrimination.

I do not think that the hon. Gentleman takes on board the nature of pay discrimination. He argues that businesses are not all bad or even endemically bad, but the Government do not begin from the position that  there is something inherently bad about business. However, we must appreciate that direct discrimination continues and that it is a component. I do not know whether it is a very large or very small component—I suspect that it is significant—but requiring the disclosure of pay information is about not only direct discrimination, but indirect discrimination. That fact is totally left out whenever he argues that we are driving at a tiny bit of unequal pay with our anti-discrimination measures. It is not tiny; it is a very significant part of unequal pay.

I say that to be as fair to business as I can: I am pretty satisfied that experience shows that the kind of disclosure that we will require through the mechanisms in clause 73 often takes businesses by surprise. Some businesses have not deliberately had indirectly discriminatory provisions, although some probably have. Discriminatory provisions might result from a business never having looked at them. They might also result from historic mergers, separations and reorganisations. It might be that nobody has evaluated whether component A of the business in warehouse Z is being underpaid in relation to warehouse Y in another part of the country. None the less, the employer is the same and so it needs to have equal pay. The figures are the way to get that out. That is another important element of discrimination that the hon. Gentleman never takes on board: he only ever talks about direct discrimination.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I intend to address both kinds of discrimination when we get the clause stand part debate.

The Minister said that such measures take companies by surprise because they discover things they did not know. How can she square that with the calculation of the implementation costs in the Government’s impact assessment:

“We have assumed that the salary/wage data needed to calculate and publish the companies’ gender pay gaps are already collected and available at least for businesses with 250 or more employees who are companies under the Companies Act 2006. We have also assumed data identifying each employee’s gender will be held”?

The Government have assumed that all the necessary data to create a gender pay audit is already held in a readily accessible, easily identifiable form in a company, but she has just implied that companies do not know what is going on because data are not held in a convenient form and that the companies have not been able to see them. Either they are held in a convenient form or they are not. If they are not, the impact assessment will have overestimated the number of businesses that have the data.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

The hon. Gentleman is miles away from the point that I am trying to make. I said nothing whatever about such discrimination being unknown to business because the data were not available in an accessible form. Data might be available, but are they being looked at in a way that discloses pay gaps? Very often, that is not the case. If on the other hand he wants to argue that all indirect discrimination is wilfully brought about by businesses who have the data available and do not put right a problem they know about, that is up to him, but I would have thought that that was quite a long way to go. I was simply trying to be fair and to say that I am rather anxious that we should not assume, as he did a minute ago, that all businesses are deliberately getting it wrong.

The impact assessment has been properly done and carefully evaluated and it is correct. None the less, the principle remains. One can take examples from the numerous local authorities that got tied down in the whole single status argument that has been going on for years. Many of them did not know that they were discriminating against particular groups of women, as opposed to particular groups of men, because they have never had to look at the respective pay that was being given. The only way anyone is able to do that is if they know about it. If they also declare in a way that is compatible with the next local authority, they can compare like with like and see why they are in a different position. There is no clash between what I just said and the impact assessment.

We need information, and we need it to be disclosed by the public sector and by the private sector in a way that makes it directly comparable, business with business, sector by sector, so that we can see where the deficits are. The hon. Gentleman is right to say that a number of businesses already disclose information—we accept that completely and are pleased about it. On that bedrock of people who already do, we shall build, engaging them in the group that the commission will manage in order to come to the appropriate measurements, but also because they will be undoubtedly the first ones to declare under the new metrics what they have already been declaring under the old metrics. They will form the platform from which we can all look at the people who are not disclosing their metrics or who are disclosing them in some way that makes them less identifiable.

Photo of Sandra Osborne Sandra Osborne Labour, Ayr, Carrick and Cumnock

If there are companies who are disclosing, they are the good guys, but what about those people who currently do not disclose? What makes the Minister think that they will do so voluntarily? What is the justification for waiting for another four years before making it compulsory, given that so many companies do not bother?

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

The basis on which we think that it will work is that once one has the metrics—I shall come in a minute to setting the system up, which should produce metrics that both sides of industry can agree quickly—the material will have to be made available publicly. It will have to be made available in an accessible form, and it will compare business A, business B and business C. Disclosure now tends to be made—I am not criticising—in a way that is not directly comparable. One might have bank A disclosing all the material that one needs to know, but bank B disclosing it in a different way. One would need to be enough of an insider in bank A and bank B to be able to compare. The stuff has to be the same, so that the employee or the trade union can see where the problems are. If bank A is already disclosing the stuff, and bank C is already disclosing the stuff, any sensible customer, any sensible investor and, overwhelmingly, any woman in her right mind is not going to go for a job with a business that is deliberately not disclosing the fact that it must have a pay gap. If it does not have a pay gap, it would disclose the information.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families)

Could there not be a perverse incentive there? One of the reasons for us all wanting exposure of all the information around pay is that our  suspicion is that those who do not disclose it are underpaying women. Therefore, they might be able to offer goods more cheaply. Is that not the argument that business is making—“This is a cost to business. We won’t do it and therefore, by discriminating, we’re able to keep our costs down”?

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

It will not be five minutes before some bold trade union notices bank B in that non-disclosure position and has a good look at what is going on in the interstices of the pay structure. Transparency is the key, it really is. It is not something that is soft and waffly that will take ages to implement, instead of which we should be hitting business now with a big poleaxe. We are suggesting a sensible way forward, and therefore we favour clause 73 over the proposals in new clause 23 and amendment 248.

The new clause would set out in the Bill details of the gender pay gap information that employers should publish periodically. It would enable—specifically provide for—such information to be used as evidence of a breach of an equality rule or clause, where that case can be made. The clause obviously also has penalties for a failure to publish designated information. Further, it would effectively require a gender pay audit as a precursor to publication, but does not really provide any flexibility in how to go about that.

Although the Government agree with some of the rationale behind the new clause, we are not calling for pay audits in the Bill. There are a number of other significant problems with the new clause. First, it jumps the gun on our proposal, which I am pleased is now accepted by all parties. The Equality and Human Rights Commission and representatives from business and unions are already engaged in the exercise of identifying what measurements and what gender pay gap information employers with at least 250 staff—I will come to that in a minute—will be encouraged to report on, on a voluntary basis.

I am pleased that following its evidence, the CBI—the Committee will recall its representative—indicated that it would encourage the reporting once the measurements have been fixed up. It is engaged in the process now. They have all come together in this way. Later this summer, we look forward to consulting on the options that they have proposed—in fact, they will consult—before they make the recommendations, which will be before the end of the year. Therefore, it is a short-term exercise, and what we should get in the end is material that everyone agrees should come out, and that we will not end up forcing on unwilling people.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills) 12:30, 23 June 2009

To pick up on the point about the CBI’s comments in our evidence session a couple of weeks ago, I gained the impression that when the Minister asked the question of the lady from the CBI, she said that it was willing to engage with the Government if the clause went through on the ground that, I suspect, it would rather be inside the tent and participating, rather than having it done to them. I did not take the lady from the CBI—in fact, other comments made outside the evidence session support this—to be saying that the CBI supports the principle of these gender pay audits in quite the broad way that the Minister perhaps inferred.

I want to make that clear, as the Minister rightly picked up other members of the Committee on earlier clauses when they quoted external stakeholder bodies and inferred their support for a particular point of view when the stakeholder bodies might not have agreed.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

I am not sure that I follow the point. The CBI representative said clearly that if the provisions are introduced she will encourage her membership to abide by them. I was immensely cheered by that, although I am not surprised by it: there are a lot of ways in which the CBI is well ahead of the Tory party on this matter. A number of really modern employers do not adhere, in the way that the hon. Gentleman’s abysmal Back-Benchers did on Second Reading, to the anti-equality, “Let’s go so, so, so, so softly” approach because equality is the opposite of business progress. That is simply not the case.

Many businesses in the CBI are perfectly capable of understanding that business progress and equality go together—they are not the enemies of one another. We are trying to harness that understanding, which modern businesses have, in setting them up with the unions and the commission to put together absolutely agreeable metrics. I am sure that they will have to argue the toss about what the metrics are. I am sure that the two sides will exhibit their natural instincts to protect their own interests, or that of their members. None the less, they are all willing and ready to do it. Indeed, they are even waiting, as the hon. Gentleman suggested, for the measure to pass. They are already going about the business of doing it and I am very pleased.

There is no question of waiting four years, although I know exactly what my hon. Friend the Member for Ayr, Carrick and Cumnock meant about the lack of compulsion for four years. However, we are not waiting four years until we start along the road of getting that material out. The commission will report, I think annually, about progress. It will be saying what the metrics are, how many businesses in all the sectors have produced the metrics and what the metrics are starting to disclose. It will also map what progress the transparency is making towards equal pay. It is a process that starts now, and if it has not finished in four years, there will be more to say and do.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

To be clear, I share the Minister’s view that the CBI agrees that equality is good for business, and my party would also share that view in many respects, but I want to be absolutely clear that the CBI’s participation in the Government’s consultation does not necessarily mean that it likes the fundamental idea of clause 73. In fact, the brief that it circulated states:

The CBI does not support clause 73 of the Bill.”

It may be trying to mitigate the damage by participating should the clause go through, but let us be clear about the principle: the CBI does not like it.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

It is puzzling to know why the CBI does not like the clause, if that is its true position. I asked the representative of the CBI in the evidence session:

“Will the CBI take responsibility once the metrics are worked out with the rest of it for driving the requirement through its membership to comply with disclosing those metrics?”

Ms Hall said:

“We would absolutely encourage our employers to use it if we come up with a system that works... I have to be equally clear that we do not support a legislative solution”.——[Official Report, Equality Public Bill Committee, 9 June 2009; c. 94, Q175.]

I asked her clearly, “Will you help encourage?” I used the word “encourage”. She said that she would drive it through her membership. What does the Tory party have against that?

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

The Minister has just proved my point. The question that she asked was, “Will you be encouraging your members to obey or disobey the law,” and the CBI rightly said, “We will be encouraging them to obey it.” It went on to say, “And we do not agree with a legislative solution.” I think that we are saying the same thing. I just want to ensure for the record that everyone is clear about where the CBI stands.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

I think that we are saying absolutely opposite things. I am saying that the CBI, unlike the Tory party, is happy to support driving the metrics, once they are fixed—that is what the lady from the CBI said; it is very interesting and I am most grateful to have been given that quote—through its membership. That is as strong as anyone could wish it and this is not a question whether Ms Hall will encourage people not to break the law.

My hon. Friend the Member for Ayr, Carrick and Cumnock has just made it clear that it is not the law that the information has to be disclosed and it will not be for years. The CBI was saying that it will drive voluntary compliance through its membership once the metrics are fixed. Ms Hall is saying that she would prefer it to be voluntary from start to finish and there not to be set out in clause 73 the ability for a Minister to in due course require compliance. That is what she is saying about the legislation. She is not saying that she does not agree with all this, although it seems as though the CBI is well ahead of the Tory party in that position, which is a shame, bearing in mind the protestations that have been made latterly about how much the Tory party is on board with equal pay—not for very long, it seems.

Anyway, let me move on and say that the consultation process that we shall go through is a major reason for the Government’s decision to make the clause as flexible as possible as to what information may be required from 2013, as we need to see how the voluntary arrangements work in practice and whether refinements for any 2013 legislative regime may be required.

New clause 23, tabled by the hon. Member for Hornsey and Wood Green, would bypass the voluntary regime by requiring designated employers to comply with the information publication requirements within 12 months. We prefer our commitment to working with willing stakeholders to come up with a system that is as workable as possible for them. It would be wrong to prejudge our discussions, as the new clause would do. It talks of consultation with the Equality and Human Rights Commission, but that is on supplementary regulations, not the main reporting principles in the Bill.

Make no mistake: I share the frustration at the lack of progress in closing the pay gap, but bypassing what looks like a process to which all parties are committed and having mandatory arrangements in force by 2011 would run the risk of riding roughshod over the legitimate  voice of both sides of the business community. Progress can better be made by bringing employers with us—by including, encouraging and cajoling, rather than compelling. We now have the commitment to drive through, which I am very pleased about.

If that does not work, clause 73 is there. That is what the CBI does not want and it is all the CBI does not want. I do not know why the Tories are trying to pretend that somehow the CBI is opposed to equal pay, because it is not, on the evidence that we saw. Anyway, that is where the Tories are and that is where we are on this issue. Happily, the CBI is standing right behind me on this occasion—and we are not even in a queue. If it does not work—

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

I shall finish my sentence, then I will. In 2013, if this has not worked, make no mistake: we will use clause 73.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

I want to clarify the point by asking the Minister to point to any part of my remarks in which I said that the CBI is opposed to equal pay.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

The hon. Gentleman said that the CBI is against the legislative provision on this. He suggested that it was saying that it would drive this through its membership only in order not to advise its members to break the law. He knows that that is risible, because the provision does not say that employers must disclose the information. It says that if they do not, in due course they will be made to. However, at the moment it is not about driving the membership to avoid breaking the law. It is about willingness to help with trying to reach an amicable solution. We have a fundamental distinction of principle between the Government stance and the Tory stance, as disclosed in recent interventions. It was fairly clear on Second Reading where the old Tory party was coming from.

I am not sure whether it is intentional that the Liberal Democrat new clause would also apply to the public sector. Technically, it would, and in a similarly unhelpful way it would cut across the specific public sector equality duty consultation that we have just launched. One of the duties that we propose is a duty on public authorities with 150 or more employees to publish the gender pay gap in their organisation.

Another flaw in new clause 23—at this point, I want to wrap it up with amendment 248, which would lower the boundary of 250 employees to 100—is the fact that it would apply to employers with 101 or more employees. We do not want to prejudice the work of the Equality and Human Rights Commission in drawing up proposals for what gender pay gap information could be published, but providing gender pay gap information as required by the new clause would be a significant burden on business. Subsection (4) seems to allow for yet further information, besides what is specified in subsection (3), to be published.

There is nothing to prevent employers with fewer than 250 employees from reporting on their gender pay gaps, and we hope that by starting there we shall none the less encourage the same effect among smaller businesses, but we do not want to impose that burden on them yet. We think, as I shall explain, that 250 is the right threshold.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families)

I believe that the Minister has said previously that the minute a figure is mentioned—26 weeks or 250 employees—people who are not brought within it think that the legislation disregards them. It would be honourable for employers with fewer than that number of employees to provide the information voluntarily, but the likelihood is that bad employers will not do so unless it is compulsory.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

I do not entirely share what the hon. Member for Weston-super-Mare might characterise as an approach suggesting that business will get away with all it can unless it is under compulsion to do something else. I see some large and small businesses already disclosing information; that is happening at all levels. We have tried, for reasons that I shall set out more specifically in a minute or two, to pick the right level at which, ultimately, if we have to, we will impose a burden by law. That is not to say that we do not look to the good small businesses to give a lead by example to the less transparent small businesses.

It is not that we do not expect the impact from big business to drive through little business. Odd as it may be in the current hotbed of views about banks to characterise a bank as benevolent, quite honestly, some banks have very good employment policies. Procurement policies in some big businesses are, to be honest, stronger than the Government’s and they drive equality through the small businesses that want to contract with them.

If we can get the ideas of transparency, disclosure and more equal pay into bigger businesses, we expect that in turn to be usable as leverage on small businesses, because it is clearly another thing that employers will look at when considering how responsible they are being.

However, even with the threshold at 250, the power in clause 73 covers 40 per cent. of the people working in the private sector. That is our information. We picked that level because we believe that it is when private sector employers are likely to have the necessary IT infrastructure to collate and publish the categories of gender pay gap information with minimal additional burden. It is also worth noting that we do not plan to place requirements on even public sector employers with such a low head count, as the duty in the public sector bites at 150.

A further concern with new clause 23 is that the information required to be published could lead to individual employees’ pay details being identified if there were only one or two men or women in each row in the organisation. I imagine that hon. Members can see my point: the smaller the business, the fewer there are in each category, so the closer we get to disclosing Mrs. Smith’s pay, which is probably undesirable.

On the question of the use to which information published under the proposed new clause could be put, subsection (8) presumes that an equality clause should apply in equal pay proceedings when there is a difference in average pay between women and men doing relevant types of work, which could be rebutted only by evidence that a material factor defence applied. In other words, the new clause would enable the published figures to be used as a key plank of any equal pay claim that might  be brought against the employer. That would seem to be the case irrespective of whether the difference was material or statistically completely insignificant. The new clause would enable an individual female claimant, for example, to use figures that showed that women in similar jobs were in general paid more by her employer than men in support of a claim that she is being paid less than a man.

That point demonstrates well how difficult it is to get the balance right between the level of disclosure and the consequences of that disclosure for employers and employees. That is why our approach of learning from the voluntary regime and people on the front line will operate from 2010. We want to create a situation in which employers look at their pay arrangements and equalise them as far as possible without any recourse to litigation. All that the new clause would do is invite proceedings. One can be fairly sure—I do not know why I am supposed to say this—that there will be lawyers looking at the published figures, seeking to target employers who look vulnerable.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families) 12:45, 23 June 2009

I thank the Minister for that. We are all moving in the same direction. The point is not to defeat the Government; they have moved a long way on equality matters. My fear is that this Government might not be in place for ever and that some of their measures might never come into being. I hope that she is right in her faith and belief that a voluntary regime will somehow lead the way.

One difference between us is timing. I will be brief, as we can deal with timing in the clause stand part debate. Our new clause is supported by all the women’s organisations and the unions. I take my lead from them. They have been fighting the issues for years and years. The Minister is supported by the CBI. I say no more than that.

In terms of the metrics, I am concerned that we are leaving something up in the air for the welcome discussion this summer. Maybe we can have a discussion about metrics later, but my fear is that everyone will be pleased to sign up to something that does not exist in the hope that the force behind it will never come. There are also issues related to the measurability of the metric. As I understand it, one of the arguments against it involves the volume of information that would be published were the pay audits mandatory. It would be easier for the overseeing body, which may be the EHCR, to measure a single metric around which one could look between company and between employer and not have to go through all the information. My fear is that, like targets, it will become the single focus around which people will put in effort.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

We are not looking for a single figure. It will need to be more complex than that. Surely the hon. Lady can see that by phrasing clause 73 as we have we have left open a wide margin for the parties. It is not only the CBI that is prepared to engage in the task. Obviously, the TUC is with us as well on this endeavour. We want to leave as wide a margin as possible, so that the parties can agree the best metrics. Then, of course, the advantage we have over her proposal is that they will all agree to it and get on with it, and we do not have to start litigating, litigating, litigating. I say that immensely to my own disadvantage since I am a lawyer.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families)

I understand where the Minister is coming from, and there is progress with encouragement from the Government. However, when parties are left to their own devices and there are voluntary arrangements, the pay gap takes so long to narrow that I am compelled to think that we have to move to something stronger.

Photo of Evan Harris Evan Harris Shadow Science Minister

My hon. Friend makes the important point that hon. Members from other parties would also feel frustrated—as I think the Minister would—about the time taken. The Minister’s point that lawyers would be hovering around the arrangements proposed by new clause 23 is the incentive that business and employers need to engage in a meaningful attempt finally to take action to reduce that part of the pay gap which is due to direct discrimination. It is important to recognise that this is not a lone attempt to come up with a new approach. It is something that we have been encouraged to table by organisations that are in direct contact with women and specialists in this area. That is why I encourage my hon. Friend in the approach that she is taking.

Photo of Lynne Featherstone Lynne Featherstone Shadow Minister (Children, Schools and Families), Liberal Democrat Spokeperson (Children, Schools and Families)

I thank my hon. Friend for that and obviously I totally agree. It is that frustration that drives me to say that I am not completely happy with the response. I do not feel that it will make the necessary difference. At an appropriate moment, I would seek the Committee’s view on new clause 23. However, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Joe Benton Joe Benton Labour, Bootle

With this we may discuss the following: amendment 13, in clause 73, page 55, line 20, leave out paragraph (b).

Government amendment 67.

Photo of John Penrose John Penrose Shadow Minister (Business, Innovation and Skills)

In contrast to the rather grand issues of principle that we have been discussing up until now and will probably come back to in the clause stand part debate, these are fairly technical amendments and I hope we will not need to trouble the Committee with them for too long.

Amendment 14 seeks to exclude armed forces, security services and so on from the operation of the clause. I notice that the Minister has tabled something similar in amendment 67, although not identical, and I am sure she will explain why her amendment is superior. It sounds as though we are on the same track and we await her comments on the comparative merits of the two amendments.

Amendment 13 is a probing one, seeking to assess the Minister’s intentions to apply the standards of the clause to the public sector. At the moment, it is excluded. I presume that she intends to apply the same standards through the public sector equality duty, but we want her comments on the record. Will she point us to the part of the Bill that contains that or comment on how she intends to apply them, via the public sector equality duty, elsewhere in the Bill? That would be tremendously helpful.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

The combined effects of amendments 13 and 14 would be to apply clause 73 to all employers, including the public sector—250 or more employers—other than the armed forces and security and intelligence services. However, there are good reasons why clause 73 does not apply to the public sector. The gender pay gap is wider in the private sector, where 80 per cent. of employees work. We have less detailed information on the private sector than on the public sector. The public sector will be provided for under clause 147, which contains a lower threshold than clause 73. Our detailed proposals are in the consultation documents, the closing date for which is September 2009.

Clause 73(2)(b) would ensure that the clause does not apply to public authorities that are not subject to the public sector equality duty, but that schedule does not include the Security Service, the Secret Intelligence Service, the Government Communications Headquarters or any part of the armed forces assisting GCHQ. As drafted, subsection (2)(b) would bring those agencies, and that part of the armed forces, within the scope of clause 73, but that has never been our policy intention. Amendment 67 will correct that drafting oversight by making the position clear. On that basis, I think that the hon. Gentleman can withdraw his amendment.

Photo of Evan Harris Evan Harris Shadow Science Minister

I am a bit confused about the purpose of the Government amendment. It would help if the Minister could clarify again the overall purpose. That would get to the heart of this group of amendments.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

I confess that I, too, got a bit confused in the middle of that response. I shall reiterate my point. We do not intend clause 73 to apply to public sector employees, for the reasons set out, and that would be the combined effect of amendments 13 and 14, even though that is not the issue—I do not think—that  they were intended to probe. Subsection (2)(b) would ensure that clause 73 does not apply to the public authorities in schedule 19 which are subject to the public sector equality duty. The schedule does not include the Security Service, the Secret Intelligence Service, GCHQ or the armed forces helping GCHQ, which means that subsection (2)(b), as drafted, would bring those agencies and that part of the armed forces within the scope of the clause, but that is not our policy intention. I am sorry that I was not clear enough before. Amendment 67 will remove them from the scope of the clause.

Photo of Evan Harris Evan Harris Shadow Science Minister

The Minister has made herself very clear. However, we are concerned that clause 73(2)(b) exists at all. There is no harm in having both the public sector equality duty and the tougher clause 73 requirements—we do not think that those go far enough, as we know from the debate on the previous group of amendments. Is she certain that there are not public sector organisations where the gender pay gap is just as wide and that an even tougher action than the public sector equality duty, which is an important, but slow boat, would not be best applied in those areas? It seems unfortunate to disapply the public sector, given that, if it met it, everything would be fine anyway.

Photo of Vera Baird Vera Baird Solicitor General, Attorney General's Office

I hope that for the benefit of the amendments the position is now reasonably clear.

We are not being soft on the public sector—quite the reverse. Through clause 147, to which we shall come presently, we will require public authorities—

The Chairman adjourned the Committee without Question put (Standing Order No. 88)

Adjourned till this day at Four o’clock.