Ethnicity Pay Gap

Caroline Nokes Excerpts

Monday 20th September 2021 Westminster Hall

[Caroline Nokes (Romsey and Southampton North) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hosie, and I congratulate my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) on having opened today’s debate. This is a really important issue, and I stand here in a somewhat privileged position as chair of the Women and Equalities Committee, because I have the opportunity to talk on a regular basis with those who seek to champion the rights of people with protected characteristics across the country.

Going back to when I was very newly in post, I remember a fantastic meeting that I had with a group of black female entrepreneurs. The first thing that they said to me was, “We must have mandatory pay gap reporting.” There was a very good reason why they wanted it to be mandatory: they had spoken to over 100 FTSE companies that all wanted to report, but were nervous about how. They were nervous about the metrics they should use and whether their ethnicity pay gap reporting would be comparing like with like with other comparable organisations, which is why those entrepreneurs said to me, “We need you to put pressure on Government. Unless it is mandatory, it will not happen in a coherent way, or in a way against which companies can be measured.”

[Kirsten Oswald (East Renfrewshire) (SNP)]

The right hon. Lady is making some excellent points. Does she agree that, as well as an obvious equality imperative for the reporting, there is a really strong business imperative, and that the Government would do well to acknowledge that?

[Caroline Nokes]

I absolutely agree with the hon. Lady. As we heard from my hon. Friend the Member for Carshalton and Wallington, some of the leading banks already do such reporting, but we wish to see other organisations doing more. Earlier this year, I was pleased to receive an email from Zurich, one of the country’s biggest insurers and the first insurance company to introduce ethnicity pay gap reporting.

There are no good reasons not to do such reporting, but there are reasons why it is complex. One of those reasons is the size of the business. With gender pay gap reporting, that is dealt with by making only the larger companies report, and I would argue that exactly the same should be instituted for ethnicity pay gap reporting: make only the larger companies do it.

My hon. Friend was right to point out that we do not want individual employees to be identifiable, so we need to find a way for the reporting to be done on an aggregated basis so that those employees do not have their personal salary details revealed. Just because something is difficult or complicated, that does not mean that we should not do it.

Gender pay gap reporting has shone a light, and as a result, that pay gap has been reduced inch by inch—perhaps I should say centimetre by centimetre, as that is all very topical at the moment. It has been reduced not as much as I would like—I would like to see it at zero—but we know there are also challenges around intersectionality. A woman in this world, in the 21st century, is still stuffed. A disabled person—or, heaven forfend, a disabled woman—has additional challenges. A black woman will have more challenges. It is time that we were honest about that.

As the hon. Member for Coatbridge, Chryston and Bellshill (Steven Bonnar) said, reporting needs to be data-driven and with granular data. We need massive amounts of detail to see which groups are the most adversely affected because, guess what, until we have accurately identified that, we cannot put in place the measures that will most help them and give them the equity that we all want.

The hon. Gentleman also highlighted something that my Select Committee looked at: the way that BAME people were affected by covid pandemic. We saw from evidence that they were disproportionately represented in public-facing roles in the care sector, in transport and in the NHS, for example. They had to interact with people daily, which put them at more risk. Those roles—particularly in care and transport—are poorly paid and insecure. Intersectionality is something that we have to scrutinise closely.

Ethnicity pay gap reporting is something that companies are crying out for. They want it to happen, but on a mandatory basis. I made that point to my right hon. Friend the Member for South West Norfolk (Elizabeth Truss) in her capacity as Minister for Women and Equalities, before she became Foreign Secretary. I hope that my hon. Friend the Minister will tell us whether we can expect an employment Bill in this Session, despite the fact that it was missing from the Queen’s Speech, because that strikes me as an ideal opportunity to introduce legislation on the ethnicity pay gap reporting that we are all calling for.

I recognise the challenges for small business when it comes to additional requirements from Government. I will not describe the reporting as a burden, because I do not think it is one. It will enable companies to look more closely at their own employment practices, and at leading organisations that have done it regardless of the lack of framework—although they would prefer it if there were a framework. I think it is an opportunity for us to look forward and drive down some of the basic structural inequalities that we still see in our country. I look forward to the Minister saying something positive in his speech.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

It is a pleasure to serve under your chairmanship, Mr Hosie. I congratulate my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) and the Petitions Committee on securing this debate on a really important issue. I am sure that we can all agree that it has been an interesting and informative debate, and I am really grateful to everyone who has contributed.

My hon. Friend the Member for Carshalton and Wallington did an excellent job of opening the debate, as one would expect of him and of a member of the Petitions Committee. As you may know, Mr Hosie, I served on the Petitions Committee for a number of years, and I know from personal experience how important and valuable its work is. My hon. Friend set the scene in a very balanced and comprehensive way and demonstrated the complexity of the issue, showing that it is not simply a binary one. There are a lot of concerns and possible unintended consequences, which I will explore in a second, and we need to put those into the mix in order to make sure we get our consideration of this subject right.

Petitions are a great way to ensure that we do not overlook issues, and that we in Parliament, in Government, and in my Department consider the matters that are of most concern to the people we represent. Today’s debate is no exception to that: the petition was signed by over 130,000 people, including 322 people in my own constituency of Sutton and Cheam, which is testament to the interest there is in ethnicity pay reporting as a means of achieving a fair workplace. I understand that the petitioner, who is here today., the many people who signed the petition, and the MPs who spoke today and others are really concerned that the Government have yet to publish their response to the 2019 consultation on mandatory ethnicity pay reporting. Clearly, the past 18 months have not been what any of us were expecting, but I want quickly to set out the journey we are on in regard to ethnicity pay reporting, giving some background and explaining some of the issues we are juggling as we consider how best to take things forward.

First, I should make it absolutely clear that the Government are committed to building back better from the pandemic, and building back fairer in doing so. People from all backgrounds must have the opportunity to achieve their potential, and a key part of building a fairer economy is ensuring that our businesses and other organisations reflect the nation’s diversity from factory floor to boardroom. That is essential to our levelling-up ambitions.

We know that we face challenges in ensuring equal access and fair representation for people from minority ethnic backgrounds in the workplace, and that we need to do so much better. Although they are improving, employment rates for ethnic minorities continue to be lower than they are for white people. The evidence also shows that once in work, people from ethnic minorities progress less and earn less money than their white counterparts, but the picture is complex, and outcomes vary substantially between ethnicities and by gender within ethnic groups. For instance, over two in five Pakistani or Bangladeshi workers are in the three lowest-skilled occupations, but Indian people are the most likely of any ethnic group to work in the highest-skilled occupations and have the highest average hourly pay.

I said that I would set out the journey that we are on. In 2016, as has been mentioned, the Government asked Baroness Ruby McGregor-Smith to examine the barriers faced by people from ethnic minorities in the workplace, and to consider what we might do to address them. One of her recommendations was that the Government should legislate for mandatory reporting and ethnicity pay data by £20,000 pay band. The Government’s response said that they were persuaded by the case for reporting. Baroness Ruby McGregor-Smith’s report highlighted the fact that equal participation and progression across ethnicities could be worth an additional £24 billion to the UK economy annually, but that we expected businesses to take the lead in reporting voluntarily.

In 2018, the Government commissioned a “one year on” report, which showed that, disappointingly, limited progress had been made. Just 11% of employees reported that their organisations collected data on ethnicity pay. Given that fact, we consulted on mandatory pay reporting in the same year. That consultation sought views on the benefits of monitoring and publishing ethnicity data; what might be reported; and what contextual information should be provided, such as narrative, action plans and ethnicity data classifications. The responses to that consultation raised a series of issues, showing that establishing a standard ethnicity pay reporting framework would be considerably more challenging than was the case even for gender pay gap reporting. There are genuine difficulties in designing a methodology that provides accurate figures and allows for interpretation and meaningful action by employers, employees and the wider public.

To give Members one example, we would expect the Department for Business, Energy and Industrial Strategy to be leading from the front when it comes to all things relating to workers’ rights in business. The Government website talks about civil service pay and says that

“of civil servants whose ethnicity was known, Asian and White staff had the lowest average annual pay (£27,200), followed by Black staff (£28,400), staff with Chinese ethnicity (£29,500), and staff from the Mixed ethnic group (£29,600), with staff from the Other ethnic group having the highest (£30,000)”.

The problem is that the average median annual pay for all of the civil service was £27,100—£100 lower.

Anyone with a basic grasp of statistics would say, “It’s not possible to have every ethnic group that is recorded above the average median pay for the entire civil service”. That is because 22% of the civil service did not identify, which is clearly skewing the figures. That is just one of the anomalies, or unintended consequences. It is not something that we cannot get around, but it is illustrative of how statistics can be misread and a problem misdiagnosed.

[Caroline Nokes]

It is interesting to note that Zurich commented that 87% of its workforce had identified which ethnicity they were from, so why is BEIS doing so much worse than a private sector company?

[Paul Scully]

This is the civil service as a whole. What I am saying to my right hon. Friend is that the figures are clearly skewed by that 22%. We want to get accurate reporting, but everybody, according to this, is above the average median pay. That cannot be the case; that is not possible. If the figures have been skewed, we cannot diagnose the problem from them, so we must work through those figures and work through a methodology, so that we can ensure that we have robust figures.