Universal Credit
Baroness O'Cathain Excerpts(7 years ago)
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Baroness Buscombe
My Lords, in response to the noble Baroness, I have to say that, on sanctions, we believe it is right that there is a system in place to reinforce conditionality and to support and encourage claimants to do everything they can to move into or towards work or to improve their earnings. Imposing a sanction is not something that we do lightly. Claimants are given every opportunity to explain why they failed to meet their agreed conditionality requirements before a decision is made.
Based on last year’s data, each month, on average, fewer than 1% of ESA claimants in the work-related activity group had a sanction in place and fewer than 4% of UC claimants had a sanction in place. We are still quality-assuring the data for JSA but, in August, the DWP published a new sanctions statistics release with a revised methodology showing how many people were undergoing a sanction. This development is part of DWP’s commitment to the PAC to improve its published statistics and to be absolutely clear about what we are doing. The important thing is that we do not impose sanctions lightly; there has to be a tangible issue at hand.
Baroness O’Cathain (Con)
My Lords, I wish some people had realised how much work my noble friend Lady Buscombe has done since we were last here debating this problem—and it was a problem. It is incredible to think that nobody has said, “Well done” to her and the Chancellor and that, instead of saying that we are touchingly loyal, saying that actually we have worked at it.
Baroness Buscombe
I am extremely grateful to my noble friend for her support for what we are doing and I very much appreciate that.
Families: Work Incentives
Baroness O'Cathain Excerpts(9 years ago)
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Lord Freud
It is clear that when you put up people’s rights, the provision has to catch up. It has been doing so, but there is some way further to go and we will be working on that.
Baroness O'Cathain (Con)
My Lords, my noble friend is surely right. You cannot just manufacture people from the ground and say, “you will be a childcare assistant”. If this 30 hours of free childcare is to be a new thing—and it seems to be—it will be an incentive for people to go into childcare. However, you cannot ask the Government to guarantee it.
Lord Freud
It is important that we have a dynamic economy with real work incentives. That is what we are trying to create, and childcare is part of it. My noble friend is right; we need to set up the incentives to make sure that that part of the market grows. In a dynamic economy, guarantees are something that you cannot necessarily time.
Youth Employment
Baroness O'Cathain Excerpts(10 years, 3 months ago)
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Lord Freud
I have written to the noble Lord on this matter. We have not prosecuted in such a case but if we found something egregious we would consider doing so.
Baroness O’Cathain (Con)
My Lords, does my noble friend agree with me that it is about time those on the opposite side celebrated with us that there has been such an increase in youth employment in the last few months? Secondly, the way in which we are doing it is right. As my noble friend Lord Roberts said, the last thing we want is one EU policy. I want to know from my noble friend the Minister whether we are getting down into the local areas to get the local employment partnerships involved in training and giving apprenticeships to unemployed youths, which is what we need to do.
Lord Freud
My Lords, it is exactly right that we need to get to the real problems of youth unemployment and the structural level of unemployment—youngsters who are workless. That figure grew through the longest boom in our history and only now are we beginning to see it come down. We are going for the youngsters who have not been looked after properly in recent decades. The figure I always cite in this House is the full number of workless—both unemployed and inactive. In 1997 that figure was 17.7%. It remained flat through the boom and at the peak it was 17.4%—not much difference. At the end of the recession it stood at 19.1% and now it is right down below any of those figures at 16.8%. That shows that our policies are beginning to work on the people who are structurally disadvantaged in this country.
EU: Youth Unemployment (EUC Report)
Baroness O'Cathain Excerpts(10 years, 5 months ago)
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Baroness O'Cathain
To move that this House takes note of the Report of the European Union Committee on Youth Unemployment in the EU: A Scarred Generation? (12th Report, Session 2013-14, HL Paper 164).
Baroness O'Cathain (Con)
My Lords, I am truly delighted to have the opportunity to move the Motion for debate so promptly after the publication of our report on 10 April this year. The report, Youth Unemployment in the EU: A Scarred Generation?, is the product of an eight-month inquiry focused on the youth unemployment situation from an EU perspective. The members of the committee have been passionate about the subject throughout, and were very keen to bring our reflections to the attention of the House as soon as possible. In that vein, I should like to start by thanking them for all their self-imposed hard work. We had a very demanding timetable to meet the production date.
I thank the range of interesting witnesses who contributed through written and oral evidence. Our confidence in our conclusions was bolstered by the fact that we had heard from a truly wide range of witnesses including pan-European—or rather pan-EU—businesses such as McDonald’s and Marks & Spencer; a wide range of international think tanks; EU and UK trade unions; and charities that work directly with young people, such as the Prince’s Trust. Special thanks are due to the young people whose contribution was invaluable in witness sessions in the House, on visits to Birmingham and Liverpool, and indeed in Brussels.
Producing a report such as this would never have been possible without the sterling work of our clerk, Nicole Mason; our policy analyst, Paul Dowling; and the committee assistant, Deborah Bonfante. All of them are endlessly patient and so very helpful. It was an absolute joy to work with them. I am sure each member of the committee agrees with me on this. Our selection of John Bell, our specialist adviser, was inspired. We are immensely grateful to him for helping us navigate the wealth of evidence and other information at our disposal.
It is a shame now that I feel I have to introduce a sour note. The government response was due on Tuesday 10 June. It was received yesterday at 11.05 am, on Monday, after a weekend when members spent many hours crafting their speeches for this evening. This is unacceptable and was described as such, and worse, by members at our meeting yesterday afternoon. Worse than that, the response has all the appearance of being a very shoddy piece of work. The authors of the response could not even copy the title of the report. The heading reads House of Lords European Union Committee Report on Youth Employment in—in where? Perhaps they were unaware that we were just addressing youth unemployment in the EU. The response does not address the conclusions in our report in many places. It is badly drafted. There is no covering letter. And, to cap it all, there are no page numbers. The layout is certainly user-unfriendly, and cut-and-paste was probably the order of the day.
I was very interested to come late into the previous debate and hear almost the same sort of comments about the Government’s response to that committee’s report. What has happened? Let us get a grip. I am not having a go at my noble friend the Minister, and we will of course formally consider the response and then write to my noble friend imminently.
Our reasons for deciding to conduct an inquiry on this topic are perhaps self-evident. We are all aware of the shocking situation of youth unemployment in the EU. The title Youth Unemployment in the EU: A Scarred Generation? might sound somewhat dramatic. However, the more we learnt about the situation and its effect on millions of young people, the more we realised that this is a question not just of jobs but of the potentially devastating impact on many, many young people, some of whom could easily be scarred for life. What damage does it do to the self-esteem, self-confidence and self-reliance of our own young people?
In March 2014, youth unemployment across the 28 EU member states stood at 22.8%, more than double the overall unemployment rate of 10.5%. This is a very slight improvement on the rate of 23.5% a year earlier. The rate of youth unemployment is also reducing in the UK. The figure in April 2014 was 18.5%, down 1.3 percentage points from the previous quarter and down two percentage points from the previous year. This level of unemployment, however, is still considerably higher than the level in the first quarter of 2008, of 14%.
It is true, and we should be very thankful for it, that the levels of youth employment are on the rise. We hope that the shock to the system that we have experienced, and indeed are experiencing, will not deflect our attention from the very serious situation that still exists. Complacency has no place in this subject, and we shall continue to look for solutions to the problem. Time and again we hear stories of the impact these levels of unemployment are having on young people.
I was particularly moved by the right reverend Prelate the Bishop of Durham’s observation of the impact of youth unemployment in his excellent maiden speech on 10 June. He spoke movingly about the young people in schools and colleges who are concerned that they will never find fulfilling work in an area in which they are interested. He thoughtfully acknowledged that some have lost all hope and aspiration long before the end of school, let alone college and university, having been told that their value is in work and economic contribution rather than being “great human beings”.
I agree wholeheartedly with the right reverend Prelate. To tackle the issue of unemployment, we need to think beyond just finding young people jobs. The conversations I had with the young people we visited in Liverpool and Birmingham brought this fact home to me. Many of these young people faced complex personal barriers to work—for example, insecure accommodation, caring commitments and criminal records. Through talking to them, I realised the importance of an approach that enables them to build stable and fulfilled lives before being able to find meaningful employment.
Therefore, I wish to preface my further commentary on various other factors affecting unemployment and the solutions to it with my belief that youth unemployment cannot be properly addressed in the absence of a holistic approach. The aim of our report was to take this knowledge of the very real impact of unemployment right across the EU and consider what the role of the EU should be and how European funds should be used.
To be fair, the issue of youth unemployment has long been central to the EU strategy. It has been targeted through the European Social Fund, which was set up in 1957. In recent years, the European Commission has shown a renewed focus on addressing youth unemployment through various measures. It has increased funding so that, between 2007 and 2013, 68% of the European Social Fund went toward such projects. Additional funds have been allocated to deal with the problem. The Youth Employment Initiative comes to €6 billion in total, with a pledge from member states to add a further €2 billion. This money is intended to go to regions with more than 25% unemployment. In the UK there are five such regions: inner London, Merseyside, south-west Scotland, Tees Valley and Durham, and the West Midlands. Not all member states were eligible for such funds because not all member states have these areas of 25% youth unemployment. Another measure is the youth employment package, which was proposed in 2012, one of whose significant elements was the Youth Guarantee.
Despite the funds at EU level, the amount of money spent at national level by each member state dwarfs the amount of available EU funding. We concluded that it was right that the responsibility for dealing with youth unemployment should rest primarily with member states. There are, however, clear benefits from the EU co-ordinating the member states’ responses, sharing good practice and using EU funds for specific tasks that complement action at national level.
I turn now to the issue of the Youth Guarantee in more detail. It is an example of the EU spreading good practice. We must never forget that nobody—no Government, no institution, no international institution —has a monopoly on good ideas. All member states should and must learn from others and avoid a “not invented here” reaction. Surely it is part of the internal single market to have this relationship. The Youth Guarantee proposal, which the committee supports, is an example of the EU spreading good practice. In essence, it is an undertaking that all young people aged under 25 should receive a good-quality, concrete offer of employment, continued education, apprenticeship or training within four months of leaving education or becoming unemployed. It was pioneered in the Nordic countries. One witness said that the operation of a guarantee scheme was likely to be the reason for the very low rate of long-term unemployment in these countries.
The Youth Guarantee could, and probably would, look different in every country, but the key benefits are: immediate support, not waiting to offer help until young people have been lingering in unemployment for some time; personalised support, finding the outcome that is right for the young person, which could be an internship, employment, personal mentoring or something else; and support for all unemployed young people.
The concept of the Youth Guarantee is different from the current system where the help is not immediate. The Minister said that because most young people on benefits come off them after six months, “It would be inappropriate to put support in earlier”. We found this rationale problematic as it does not account for those young people who have found unsuitable or temporary employment.
Implementing a Youth Guarantee scheme would be an opportunity for the UK to use EU funds to try something new which we know has worked in other member states. I repeat that we were disappointed by the Government’s lack of engagement with the EU’s recommendation that member states should implement a Youth Guarantee. Of the eligible member states, the UK was the last to submit a report outlining whether and how it would use a youth guarantee scheme. Our Government submitted it on 3 March, more than two months after the 21 December deadline. That does not show a lot of enthusiasm or interest.
In the report, the Government confirmed that they would not implement a Youth Guarantee scheme and used the report to describe how current initiatives served the same purpose as would a Youth Guarantee. We were disappointed by the Government’s decision, which we think would complement efforts to tackle youth unemployment at national level. We recommended that the Government reconsider this decision and use the funds to pilot a Youth Guarantee scheme in the five areas eligible for the extra funding. A Youth Guarantee scheme would tackle unemployment at an early stage before the feeling of being worthless and the loss of aspiration kick in.
A Youth Guarantee scheme is focused on the specific needs of the individual and therefore would complement UK measures, such as the Youth Contract with its focus on changing the labour market, making it easier for businesses to take on young people though providing wage incentives and support for those who are looking for work experience. We welcomed the September guarantee for 16 and 17 year-olds and the Youth Contract’s support for getting the most disadvantaged into a job or training or on to an apprenticeship scheme. Similar support needs to be offered to all young people struggling to find employment.
Throughout our evidence, we heard that one of the unusual aspects of this youth unemployment crisis is that it is affecting a wide range of young people, not just the most disadvantaged. Will the Minister say what the take-up of the Youth Contract has been? Has it improved? The initial figures show that between April 2012 and November 2013 only 10,030 wage incentives were paid to employers who had taken on an unemployed person, which is considerably less than the 160,000 available.
Inevitably, a great deal of the evidence we received was UK-specific, particularly the evidence we received from representatives of local bodies and from the noble Lord, Lord Heseltine, who worked with Birmingham City Council on its growth strategy in the aftermath of the publication of his government-commissioned report, No Stone Unturned: In Pursuit of Growth. We received much evidence that the best way of connecting with harder-to-reach young people is by using local specialised charities and other organisations. We were most impressed by organisations in Birmingham and Liverpool. It is easier for young people to connect with these grass-roots specialist organisations. Local authorities are in the best position to identify them. We welcomed the Government’s move toward greater decentralisation of funding and recommended that local enterprise partnerships, in partnership with local authorities, should be enabled to oversee the management and delivery of programmes. This would enable a move away from large-scale contracts towards the use of smaller service providers with knowledge of and, commitment to, the local area—in effect, localism.
In a Damascene moment, one that no committee member will forget, a member of the committee said, “We are investigating, discussing and taking evidence on youth unemployment, so we should take evidence from young people”. That was so true. We rapidly rearranged timetables, enabling the committee to schedule two visits, one to Birmingham and the other to Liverpool. Thanks to the great support of our committee staff and specialist adviser we set about remedying this problem. The young people were illuminating. There were open, no-holds-barred sessions. When the young people were asked about their attitudes towards various government initiatives, some of the language was unprintable and certainly unparliamentary. One youth witness commented that some of the policies in the area of youth unemployment would never have been put forward by a young person. The need to include young people in decision-making is another argument for localisation. It is easier for young people to be involved with local bodies, as they probably know some of the people involved. Young people prefer to stay in their own locality, where they have their friends as support groups.
There is certainly room for improvement in involving young people in decision-making. Local enterprise partnerships currently do not have to consult young people when making decisions about their youth unemployment strategy. We suggest that local enterprise partnerships should, as a matter of course, have to consult and involve youth groups about policies that affect them.
The final issue I want to touch on is skills mismatch. There are currently about 2 million unfilled vacancies in the EU. The digital skills area is a particular concern as nations in south-east Asia, India and many other areas appear to be far ahead. Skills mismatch is a particular problem in the UK. In its 2013 country-specific recommendations, the European Commission said that, despite progress in recent years, a significant number of young people did not have the necessary skills to compete successfully in the labour market. The Commission found that there was an oversupply of low-skilled workers in the UK and that the unemployment rate of low-skilled 15 to 25 year-olds in the UK was 37.2% in 2013, which was significantly above the EU average. We recommended that the European Social Fund be used to bolster skills training in this area and to ensure that young people get careers advice that matches their skills to the job market.
As an aside, I welcome the new House of Lords ad hoc Digital Skills Committee. I have to admit that I put it forward, and I am on the committee. We have our first meeting tomorrow, and I am truly looking forward to it. It will be chaired by the noble Baroness, Lady Morgan. If noble Lords were in their place during her contribution to the previous debate, they will know how fortunate we are. Digital skills is one area in which youth unemployment could be on the way to being solved.
I know I have stretched the House’s patience, but I thank noble Lords for being patient. I believe that there are four key changes which could ameliorate the current dreadful situation for the youth of the EU. There should be more of a focus on consulting and involving young people in developing youth unemployment policy. The Government should learn from best practice abroad and bring forward new ideas and initiatives, such as the Youth Guarantee. There should be a localised approach to devising and managing schemes that aim to address youth unemployment, which should involve local businesses, charities and specialist organisations. Finally, there should be better matching of skills to qualifications. I beg to move.
Baroness O'Cathain
My Lords, I thank everybody who has taken part in the debate. I particularly thank my noble friend the Minister. I gave him a slightly hard time—only slightly. I can be much more ferocious than that. His response was very good but, in listening to it, I reflected how confusing this whole issue is. We have so many different ways of looking at it. If I were 17 years of age with not much educational background, I just wonder how I would react having listened to this debate. Perhaps I would say, “There are the people in suits and dresses saying they are going to do this and that”. The Minister mentioned about 20 different and confusing areas that could solve the problem. Is it not just all too confusing? The final point that my noble friend made about the Youth Guarantee and the Youth Contract did not reflect the letter that I saw, which was much more along the lines of, “Oh well, okay, the Youth Contract is all right”, but people in Brussels were still saying that they really wanted the Youth Guarantee. Perhaps we should have another discussion about that.
In the mean time, I thank everyone who has taken part in the debate. I certainly want to say to my noble friend Lord Shipley that I am sorry he thought that the report was depressing. The fact is that it is a depressing situation.
Lord Shipley
I am sorry but I said that it was an impressive report, not depressing.
Baroness O'Cathain
I am sorry. That is the second time “sorry” has been mentioned in this House tonight. It is nice to be able to say sorry.
The situation is actually depressing throughout the EU but there are shafts of light coming in. One of the great things about the report is that it is not political. We did not mention parties and tried to work for the good of the youth of the whole European Union. We should, in particular, use the experience that can be observed in the member states and test it out to try to solve our own horrific problem—because it is a horrific problem. I go back to the right reverend Prelate the Bishop of Durham’s analysis in his maiden speech the other day. We have to remember that.
The Minister neatly glided over the situation regarding local enterprise partnerships and did not say whether he was prepared to consider whether they should consult young people, in groups or individually. We received most of our really good evidence from talking to those young people. After all, it is the young people who count. That is why we are doing this and why I hope we have made a difference to the future of these young people by exposing a lot of the stuff in this report.
I thank again all our staff. There are so many thanks going around this Chamber but I could not have done any of this without the terrific support that we received, and the members of the committee have been ideal. If noble Lords want them as chairmen of other committees, look at all of them. They do an excellent job, and I thank them.
Motion agreed.
Benefits: Sanctions
Baroness O'Cathain Excerpts(10 years, 11 months ago)
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Lord Freud
We are not working to targets. We have made it absolutely plain that that is not our policy. We have had a study done on that by the head of JCP, Neil Couling, which reported in May and found that we did not run targets. Obviously, we collect management information, without which we could not give out the kind of data that is requested.
Baroness O'Cathain (Con)
My Lords, will my noble friend give us some indication of the sort of training given to those who deal with some of the rather disturbed people who go to jobseekers’ offices? I have seen several instances where the people in this very difficult situation get a bit disturbed about it and need a bit more sensitivity. I have mentioned this to the Minister before. I wonder whether the responsibility lies with the local authorities dealing with these issues or with the department.
Lord Freud
Jobcentre Plus advisers are well trained to look after their clients. One of the most difficult areas for them is always mental health, and that is something that we are looking to push further forward. We are introducing a mental health toolkit along the lines of that given to prime providers in the Work Programme.
Food: Food Banks
Baroness O'Cathain Excerpts(11 years, 4 months ago)
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Lord Freud
My Lords, there is actually no evidence as to whether the use of food banks is supply led or demand led. The provision of food-bank support has grown from provision to 70,000 individuals two years ago to 347,000. All that predates the reforms. As I say, there is no evidence of a causal link.
Baroness O'Cathain
My Lords, does my noble friend agree that there is a lot of mythology about food banks? This movement was started by the Christian churches—people reaching out to people who are not necessarily long-term unemployed but who have found themselves in a position through no fault of their own. There are abused women who have been given local flats by housing associations but who still do not have money until their benefits come through, and this is where groups of people, operating through the churches —it started in Salisbury—can do so much good. One of the benefits of them for people like me is to make sure that we do something for our fellow men. Can my noble friend confirm that this is nothing at all to do with the welfare system and is pure charity?
Lord Freud
My Lords, yes, local provision that reflects the requirements of local areas is absolutely right. Charitable provision is to be admired and supported.
UK: Poverty
Baroness O'Cathain Excerpts(11 years, 8 months ago)
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Lord Freud
Well, my Lords, I actually said the exact opposite. I said that there has been an increase in the use of food banks and that, indeed, there had been a large increase under the previous Government. We have since September 2011 been advising people of this local resource and other resources. We are transferring elements to the Social Fund so that local areas can create local welfare support for people who are in crisis. It is important that we have that kind of provision, either through local authorities or, indeed, through third-sector parties.
Baroness O'Cathain
My Lords, is not the use of the term “food banks” confusing to many people? They are actually temporary measures for people who are suddenly put out of work and do not have enough cash to feed children and so on. Normally, the food banks under the Trussell Trust give families food for three days while it puts them in touch with social services, charities and other organisations. If there is time, would it not be a good idea to have a full-scale debate on food banks, what they mean, how they are operated and how they should be supported?
Lord Freud
My Lords, I thank my noble friend for that. The essential point is that we are moving to local authority support for people who are in trouble as that is the best place for them to get that support. Food banks may well be part of that. One thing that local authorities are looking at is providing support in kind to people who would otherwise have taken cash. It is a more effective way of doing it. Food banks are another aspect of that.
Gender Balance among Non-Executive Directors (EUC Report)
Baroness O'Cathain Excerpts(11 years, 10 months ago)
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Baroness O'Cathain
My Lords, I support the Motion. Before giving my reasons for doing so, I want to reassure the noble Lord, Lord Pearson, whom I greatly admire, particularly for his assiduousness in pursuing all the nooks and crannies of European legislation. As far as we know, eight member governments and parliaments are against this draft directive, which is just under a third. As there are 27 members and about a third of them are yet to be clear about their position, it looks quite likely that the proposal will be withdrawn. I will not say very likely and I will not bet on it because I am not a betting woman. However, the response we had wholeheartedly in support of this has been remarkable. It has made me very proud to chair Sub-Committee B, which did this exercise. We received so much goodwill and the whole point is to say that the Commission is right to highlight this. This Government have benefited from the actions undertaken by the previous Government in asking the noble Lord, Lord Davies, to look at this whole area. That was the spark that ignited a great flame of interest, for which all credit is due both to the previous Government and of course to the noble Lord, Lord Davies.
Anybody who reads the newspapers now realises that there is huge support for this. I am not saying that our committee started it—not at all—but the reality is that the time is right. When it is said that the European Union will not do this or that, we think the European Commission has a strong role to play in highlighting the issue. However, it also has to get itself attuned to what is likely to be best practice. Unfortunately, there is quite a lot of confusion at the moment about non-executive directors, executive directors, listed companies and private companies. I read the debate that took place in the other place on Monday. So many Members there just do not understand what is going on. What we really need to do is encourage the Commission to look at the whole thing before it even thinks about going down the regulation route. Instead of legislating, we need to encourage. I am convinced that there is an open door which needs very little pushing at the moment.
As anyone who attended the debate on our report in November will realise, the Commission came up with this draft directive—at least, it was going to issue one, but changed its mind, obviously because of some problem within the Commission. We issued our report, the Commission then issued its draft directive, which was a lot less regulatory that we thought it was likely to be. However, it still has the idea of mandatory quotas. By persuasion and by discussing it quite widely, we are now trying to clear people’s minds about what we are talking about: encouraging boards to look at the real problem of gender inequality at the top level. That is not because we just want women on boards but because we absolutely believe that they would make a very positive contribution. There is no question about that.
I want to take issue with some of the things that have been said, including in the debate. It has been said that there is evidence that business would be better and that there would be more profits. We have been rigorous in examining this and we cannot find evidence that there is a direct link between putting more women on boards as non-executive directors and better financial performance by the company itself. That is why we stated it. We do not want to make any statement at all which has not been proven by the evidence. I assure noble Lords that if they go back to the original report, they will find that it is all evidence based and we can all stand up and support it.
We need to get away from the confusion. At the moment this is only a start. People are now saying, “What about executive directors? Why are there no executive directors on the way up?” Having women as non-executive directors on boards acts as a stimulus for women within organisations to say, “If she can get there, why can’t I?” I know of two specific cases where that happened to me as a non-executive director of two different FTSE 100 companies. I used to go and talk to the senior women and they all thought it was a great example. Both those boards now have several women directors on them.
We are starting from a very low base and people say that it is not going to be achieved. However, there were no other women on the first board that I was on in 1984, and in the FTSE 100 companies at that stage there were six women directors. Now around 17% or more of the people on boards are women. That is a huge increase. People say that it is not happening fast enough—of course it is not happening fast enough—but at least we are getting there. We have highlighted these issues and formulated this reasoned opinion so that the European Union can think again, moderate its demands and not be so entrenched about legislative quotas. Those will turn women off. Women will say that it is tokenism and patronising.
I hope that we can achieve all that we want and that the noble Lord, Lord Pearson, will come round to our way of thinking. I support absolutely what my noble friend has said.
Baroness Bottomley of Nettlestone
My Lords, I strongly support my noble friend Lord Boswell for his sanity and good judgment. I want to speak about the gap between the last two speakers because this proposed directive is an example of the most irritating and frustrating way in which the European Commission sometimes behaves. It is alienating and irritating and it maddens individuals who are more open-minded than some might think about the whole European endeavour.
A quota is alien to the British way of thinking. We believe in voluntary principles, in persuasion, in best practice and a bit of naming and shaming. Our approach is a voluntary one wherever possible and quotas offend. A target, a goal, an objective, but not a quota.
In any event, why a quota for non-executives? I want a quota for the number of male teachers in primary schools because a great number of primary schools do not have a male teacher. That is a much more serious problem for disadvantaged children growing up with no male role model at all. To introduce a quota for non-executive directors is ludicrous when we all know that the serious issue is what happens to female executive talent as women go up through an organisation.
Seeing the noble Baroness, Lady Howe, in her place reminds me that my experience goes back 20 or 30 years to the issues in the health service. It was overwhelmingly a female workforce, overwhelmingly used by women, taxpayer funded, and yet somehow it was led by stale, pale males. In that case, introducing targets and goals, particularly in a taxpayer-funded service, seemed extremely sensible. I think that we managed to get non-executive appointments up to where something like a third were women.
The reason that business invests and flourishes in this country is precisely that our corporate governance structures are principles-based, not rules-based. How many realise that in the top 15 companies in this country 23 different nationalities are represented? I challenge anyone to find any other member of the European Union which has 23 different nationalities represented on its top 15 companies. In other words, diversity in its true sense is a goal which is celebrated in Britain and we have a great deal to be proud of.
I turn now to the report of my splendid colleague, the noble Baroness, Lady O’Cathain, who was a pioneer for women on some of the most senior boards. I celebrate this report and believe that it is excellent reading for a great number of people interested in the cause. The only minor area of dispute is that I am sympathetic to her point that there are not demonstrable results from having a gender-diverse board, but I want her to lock horns with McKinsey, because it is verboten to disagree with McKinsey in this day and age. However, it asserts that gender-diverse boards achieve superior financial returns, both in their net profit margins as well as the higher returns on equity each year.
Baroness O'Cathain
The fact is that we were determined that it had to be absolutely evidence-based. Do not worry—we went to McKinsey. We do not have firm evidence for that; in fact, figures were floating around which were withdrawn when we started to pursue that assertion.
Baroness Bottomley of Nettlestone
I am more sympathetic to the noble Baroness’s argument than I am to people who go excessively far in arguing for the financial returns. Frankly, enlightened businesses have gender-diverse boards, so it is very hard to tell what the variable is. However, there is evidence that where governance is weak, female directors exercise strong oversight. They are very good at managing and controlling risk. When you talk about women and cost control, there is not a household in the country where family members will not immediately nod their heads and say “Yes, it’s the women who are in charge of cost control”.
I am absolutely certain that the evidence about female directors enhancing board independence is valid. Females are more resilient and resistant to groupthink, and that has so often been the case in discussions and debate, whether in politics, in business or in many other enterprises. If part of the causes of our corporate disasters has been groupthink, then I have no doubt that women, with the competence and necessary skill, make a great addition. Their management style tends to be much more appropriate to the modern forms of management than the more didactic, autocratic patterns of the past.
The real issue, of course, is that he who pays the piper calls the tune—and by 2025 there will be more female than male millionaires in this country, and 60% of the private wealth will be managed by women. It is enlightened self-interest to take this topic seriously. Nobody doubts the Government’s commitment in this area. Since the report of the noble Lord, Lord Davies, 49% of non-executive appointments have been women. As I have said, the noble Lord has done a great job and we are all indebted to him, but there are so many architects and investors in this policy, and no one person can be thought to have achieved that change. However, being led by a man—regrettably—has probably been a factor in achieving the necessary results. We are now on target for women to constitute 40% of board membership by 2020.
This is, therefore, a success story, but it is important that it is not a passing fad. It needs the tenacity, the long-term approach and the monitoring. I congratulate my noble colleagues on determinedly resisting the idea that this is an area of EU competence. It will simply be counterproductive in our context. We endorse the importance of this principle and congratulate the Government on the progress to date, and I support my noble friend in his Motion.
Baroness Thornton
My Lords, this is the second debate we have had about this issue. I realise that this is the second report, which deals with a different matter, but it is important that we recognise that as we debate the need for gender balance in positions of leadership in business, this Parliament and this Government should acknowledge their own failings in this area. We have no room to be self-satisfied. With just 22% of our current MPs being women, and just four women—that is, 18%—in the Cabinet, we are on a long road.
Baroness O'Cathain
I thank the noble Baroness for giving way. This same argument came up before. This has nothing whatever to do with the place of women as non-executive directors on boards of listed companies. The opposition spokesperson in the other place went that way in his opening statement as well but then came firmly down against quotas and for the reasoned opinion.
EU Report: Women on Boards
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Baroness O'Cathain
Baroness O’Cathain to ask Her Majesty’s Government, in the light of the Report of the European Union Committee on Women on Boards (5th Report, HL Paper 58), what is their position on proposed EU action to increase gender diversity on boards.
Baroness O'Cathain
My Lords, this is a time when we are making history. The report of the European Union Committee on Women on Boards was published last Friday and we are debating it tonight, which is two working days. This is excellent, of course, but it gives no time whatever for a government response. We hope that they will give one in due course and we look forward to that.
Gender equality has long been one of the core objectives of the European Union. The treaty on the functioning of the European Union is clear that,
“in all its activities the Union shall seek to eliminate inequalities and to promote equality between men and women”.
There has been important legislation, including the 2004 gender directive, which insists that there should be equal treatment of women and men in the access to and supply of goods and services, and the 2006 directive on equal opportunities for men and women in the workplace.
Since 2010 this objective has been vigorously pursued by the vice-president of the Commission, Viviane Reding, and in this country by a number of business leaders, spurred on by the 2011 inquiry by the noble Lord, Lord Davies of Abersoch, at the request of the Department for Business, Innovation and Skills.
The Commission action so far has included in September 2010 the strategy for equality between women and men; and in March 2011 European companies were invited to sign the “Women on the Board Pledge for Europe”, which required that companies should commit to raising female representation on their boards to 30% by 2015 and 40% by 2020. UK action so far has been the Davies report, to which I have already referred, which underscored the benefits of having more gender-diverse boards. The Government have largely accepted the findings of the Davies report but have rejected the ideas of quotas at the EU level.
Sub-Committee B undertook this inquiry because of the topicality and the importance of the issue, its place within the committee’s scrutiny remit and the expected directive from the Commission imposing quotas for women on boards. This proposal was initially expected on 23 October but was postponed. We now expect the directive to be put forward by the Commission tomorrow. So if that is not topical, what is? A leak appearing in FT.com today confirms that the Commission is widely expected to propose some form of quota for 40% of women on boards in plcs within the EU by 2020.
In asking this Question, I thank everyone who has contributed both written and oral evidence to our inquiry; and the members of the sub-committee who worked so hard to produce this report, four of whom are taking part in this debate. I thank them particularly. I also thank our clerks, Mark Davis and Nicola Mason; the policy analysts, Paul Dowling and Sarah Watts; and our committee assistant, Elaine Morgan.
There is a strong case for action in this area. As already noted, gender equality is already a key EU objective. Viviane Reding has made this a priority. The committee found merit in this work to encourage greater female board membership and urges the Government to continue to support the Commission as well as pioneering their own initiatives.
We observed the significant benefits derived from a more diverse board. These include better reflecting the perspectives of customers; challenging established thinking—or “group think” as we are now supposed to refer it; female board members can serve as role models for women within and outside organisations; and the need for fairness and equality of opportunity—for example, in the UK, women make up 45% of the labour force and 60% of graduates, yet only 17% of board positions are held by women in the FTSE 100. In the Cranfield study it was stated that there are 2,500 “board ready women”—that sounds a bit like “chicken ready”. However, we are not convinced by the evidence which has been put forward for a direct link between gender diversity and increased business profitability and would discourage the promotion of such claims in the absence of further and more conclusive research.
On quotas, the Commission is well placed to encourage member states to act in this area. Article 157(3) TFEU allows the EU to adopt legislation aimed at ensuring equal opportunities. However, voluntary progress at the level of member states has been slow. This was the Commission’s key argument for the suggestion that quotas should be imposed. It takes as one example the adoption of quotas in France, where a 40% quota for female board directors is imposed at a national level. However, based on the wealth of evidence the committee received, we considered that similar legislative action from the EU at this level would be inappropriate for four key reasons.
First, to impose EU-wide legislation would jeopardise self-regulatory efforts and the current positive engagement from industry in countries like the UK where businesses are strongly opposed to quotas. Secondly, there is a possible argument that this would undermine the principle of subsidiarity. Subsidiarity being the case, the EU should act only if the proposed action cannot be achieved by the member states at national and regional level. Thirdly, positive non-legislative efforts are already being made in the UK. Fourthly, any legislation which induces quotas is best imposed at national level, and this is already being done in France and Italy.
Quotas would achieve statistical change but neglect the underlying causes and risk fostering the incorrect perception that women on boards were not there by merit—for example, 89% of the 2,600 women who responded to the consultation of the noble Lord, Lord Davies, opposed quotas. Quotas would not address the lack of a sustainable and consistent “pipeline” of women through businesses and onto boards, according to the National Association of Pension Funds.
While in the long-term progress has been disappointingly slow, female representation on boards has increased exponentially in recent years. In 2011-12, we saw female board membership increase by 3.1%, the largest reported increase at FTSE 100 level. Indeed, when I look back at my experience when I had my first FTSE 100 board appointment in 1984, I was one of six women in the whole of the FTSE 100 who had a board appointment. So we have made progress. In March to September 2012, 44% of new board appointments were female.
As to the experience of other countries, which is often quoted, Norway introduced a quota of 40% women board directors in 2003, with a deadline of 2008 for publicly traded companies. The 30% club pointed to the low number of women in executive positions in Norway as a lack of the effectiveness of quotas. Despite 44% of board members being female, only 8% of Norway’s CEOs are female.
Barnali Choudhury, a lecturer in corporate law at Queen Mary College, London, highlighted the disputes surrounding the practicality of quotas despite its strong culture of quotas. She therefore suggested that a one-size-fits-all solution around Europe would be deeply flawed given the variance of such cultural factors.
Too little time has elapsed to assess the impact of quotas on other EU countries such as France and Italy, where legislation is less than two years old. However, it is notable that, despite having quotas in France, the French Administration agree that EU action should begin with non-legislative measures.
Henry-Labordère, Counsellor for Labour Affairs at the French Embassy, was keen to see co-ordination at a European level but believed that a “graduated approach” of “reasonable voluntarism” was the most appropriate first step. We investigated and suggest other measures, including monitoring progress. A number of witnesses suggested that more effective monitoring in the areas of gender diversity of board members could go some way to solving the problems that this report seeks to address. However, witnesses were divided on the best means of performance monitoring. Witnesses also highlighted the merits of voluntary initiative, such as the “comply or explain” element in the voluntary code of conduct which was launched in July 2011. This is significant as it was drawn up by the search firms sector, which has a prominent role in the appointment of board members.
In conclusion, we acknowledge that progress in this area is needed, but that it should be business-led, enabling a sustainable supply of women to move up the “pipeline” and into board positions. Therefore, the imposition of quotas at EU level should be resisted, since they would negate the engagement and goodwill shown by businesses in recent years. The Commission has a role to play in fostering this voluntary approach and should focus on highlighting best practice in the area. While it is beyond our remit, we note also that developing a sustainable supply of female talent may also require broader cultural reform of working practices. As such, we welcome the broad focus at both national and EU level on these wider issues. This is the most important recommendation.
Equality: EC Policies on Women on Corporate Boards
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Baroness Stowell of Beeston
The noble Baroness makes an interesting point. The sooner employers think about the flexible arrangements to which she refers in the context of men as well as women, the more quickly women will be seen not as a special case but as what they rightly are—equal in terms of ability, and the type of people that we want in those positions.
Baroness O'Cathain
My Lords, does my noble friend agree that the work commissioned by this Government and continued by the noble Lord, Lord Davies of Abersoch, still continues and that he is very concerned about the issue raised by my noble friend on the pipeline leading to executive directors? I am convinced that progress has been made since 2010 whereby 13.3% of FTSE 100 companies had women on boards at that stage and now 34% of non-executive directors are women. At that stage, there were 21 male-only boards and now there are only eight. However, the work will continue and we do not need an EU directive on quotas because they are patronising.
Baroness Stowell of Beeston
There are lots of statistics to show that progress is being made. As far as I am concerned, business needs to show that it wants women and not just that it is willing to put up with them