Industrial Strategy: Engagement

Lord Prior of Brampton Excerpts

Monday 27th February 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, we have published a Green Paper that invites people and organisations across the country to contribute to our industrial strategy. The Government are also committed to strengthening the worker voice in the boardroom. The Green Paper on corporate governance reform explores a range of options, and the Government will publish their response in due course after analysing responses they have received.

[Baroness Prosser (Lab)]

I thank the Minister for that response. The 10 pillars of the industrial strategy cover the processes required to establish the structure against which the strategy’s progress will be measured. There is, however, no mention of the human interaction needed to successfully implement those processes. There is a well-established link between employee engagement and productivity, which in this country lags behind that of France, Germany and the United States. What is the Government’s plan to ensure that companies have in place appropriate training for all levels of management, so that inclusion and employee voice are present, and the effective delivery of the industrial strategy can be measured? I note that the noble Lord mentioned workers on boards—a policy that we support, but which does not deal with employee voice at all levels of a company.

[Lord Prior of Brampton]

My Lords, the noble Baroness is absolutely right. The link between employee engagement and performance, however you measure it, whether in productivity or quality, is proven, so engagement is extremely important. However, I do not believe that just having someone on the board of a company is necessarily the right way of getting that engagement, as the noble Baroness mentioned. Engagement is much deeper than that. It is predominantly the responsibility of individual companies to tackle this. You can see the resulting performance when they get it right.

[Lord Broers (CB)]

My Lords, I have just come from a meeting of the Institution of Engineering and Technology at which it launched its report Skills and Demand in Industry. The one thing it pointed out to everybody was that only 9% of technology and engineering staff are women, yet 15% of them graduate from our engineering schools and in my own university of Cambridge the figure is over 20%. What are the Government doing to ensure that more women become engineers in industry and participate in it, especially through the apprentice route?

[Lord Prior of Brampton]

It is interesting that only 15% of women graduate in this subject. In the case of medicine, for example, the figure is now well over 50% and is nearly 60%. It is a very good question. Interestingly, I went to Rolls-Royce last week and met a number of apprentices there, some of whom are doing degree-level apprenticeships. That may be one way of increasing the number of women going into this area. It has been a problem for many years and we are only in the foothills of cracking it.

[Lord Foster of Bath (LD)]

My Lords, does the Minister agree that share ownership can provide the motivation to help employees and managers deliver for their companies and, of course, deliver the industrial strategy? If he does, what more can the Government do to promote such share ownership?

[Lord Prior of Brampton]

Share ownership can be a part of this but engagement of people in their workplace goes much deeper and is much more of a day-to-day issue than share ownership or board directors and the like. John Lewis and the mutuals have demonstrated the value of mutuality and ownership, so this does have a part to play. However, it is only part of a much bigger picture.

[Lord Forsyth of Drumlean (Con)]

My Lords, I declare my interest as chairman of a public company. Will my noble friend look at the widespread practice among fund managers and large shareholders of contracting out their responsibilities for corporate governance to outside organisations, and encourage them to engage directly with companies involved in the matters which concern the Government, such as executive pay and other matters?

[Lord Prior of Brampton]

The noble Lord may have seen the letter that BlackRock sent round to all FTSE 100 companies in which it talked very strongly about the need for long-term sustainable improvements when considering remuneration. I was pretty staggered to see that between 1998 and 2015 the average take-home pay of a FTSE 100 chief executive has gone up from £1 million to over £4 million. In 1998, that represented 47 times the average salary of an employee, now it is over 128 times. Remuneration is a very serious issue and if we want to live in a fair society, we need to address it.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, will the Minister have a look at a Private Member’s Bill that was introduced here twice previously by the now deceased Lord Gavron, who was very prescient in seeing the difficulties arising from the growth in the salary gap between CEOs and their employees? That Bill was supported by noble Lords all around the House. It would be well worth the Minister’s while to look at it. He mentioned that he does not want the Government to interfere in the deals between employers and employees in the private sector. However, the Government have responsibility in a very substantial part of the country’s employment—namely, in the public service. What are the strategy and targets for improving productivity in the public service?

[Lord Prior of Brampton]

The noble Lord makes a very good point. Industrial relations, employee engagement—call it what you will—is much better by and large in the private sector than in the public sector. We are not good employers, if we are honest. Like me, a number of noble Lords in this House were staggered that the junior doctors, for example, were forced into taking strike action. These people are vocationally committed, yet somehow we created an environment in the public sector which is far from satisfactory.

[Lord Foulkes of Cumnock (Lab)]

My Lords, will the Minister, on behalf of the Government, have a word with the Speaker, the Senior Deputy Speaker and the Clerk of the Parliaments and ask them to consider how the employees of this place might be involved more in decisions regarding its running?

[Lord Prior of Brampton]

My Lords, a number of our leading companies have very innovative ways of engaging people in their business—for example, Google and other companies like it have installed table tennis tables. I wonder whether the noble Lord, Lord Fowler, might consider making way for a table tennis table in this place.

[Lord Howell of Guildford (Con)]

My Lords, does my noble friend concede that turning earners into owners and expanding employee share ownership in various forms can, in certain circumstances, be immensely beneficial and a great promotion for industrial competitiveness and effectiveness? Will he bear in mind particularly the case of the National Freight Corporation where a major share ownership by all employees had an enormous effect in improving productivity? It was a project carried forward with great vigour by no less a person than the noble Lord, Lord Fowler—now the Lord Speaker of this House—and me, as successive Secretaries of State for Transport in the 1980s.

[Lord Prior of Brampton]

I agree with my noble friend that employee ownership can be very beneficial—the mutual is another model that can be beneficial—but it does not guarantee success. There are many other aspects of corporate life that are very important. The Co-operative Bank is an example of an organisation that has not been a conspicuous success in recent years. It can be very important but it is not the whole answer.