Trade Union Bill

Iain Wright Excerpts

Tuesday 10th November 2015 Commons Chamber

[Kevin Brennan]

The hon. Gentleman must be a mind-reader; I am coming on to that shortly.

[Mr Iain Wright (Hartlepool) (Lab)]

rose—

[Kevin Brennan]

I give way to the Chairman of the Select Committee, whose expertise it will be interesting to hear.

[Mr Wright]

Following on from the points made by my hon. Friend the Member for York Central (Rachael Maskell), does the shadow Minister agree that the hallmarks of a good, productive, innovative economy are collaborative, harmonious industrial relations? The likes of Airbus with Unite, and Community throughout the beleaguered steel industry, will help to make sure that we can stay competitive. Trade unions are good for not just individual workers but for a modern, productive economy.

[Kevin Brennan]

Yes, and they would be part of an industrial strategy if this Government believed in one, but instead, the Government are basically walking across the street to pick a fight where no provocation exists.

Oral Answers to Questions

Iain Wright Excerpts

Tuesday 10th November 2015 Commons Chamber

[Sajid Javid]

I am delighted to say that my hon. Friend’s constituency has had a 37% increase in apprenticeship starts since 2010. I know that he is very passionate about this, and that he has done much to promote apprenticeships. He is absolutely right to talk about the quality. Higher and degree apprenticeships are widening access to professions, giving young people new, well-respected routes to professional education at some of our best universities.

[Mr Iain Wright (Hartlepool) (Lab)]

The Secretary of State talks a good game, but the fact is that apprenticeship starts have dropped in every single year since 2011-12. The ambition for 3 million new apprenticeship starts is commendable, but would he concede that, in the light of the uncertainty surrounding key policy aspects such as the apprenticeship levy, he is going to struggle to hit that target?

[Sajid Javid]

First, I must point out that there were more than 492,000 apprenticeship starts in 2014-15, which was up 50,000 on the previous year. The hon. Gentleman mentioned the apprenticeship levy, and I know that he and his Select Committee have done some work on this. I hope that he will acknowledge that that will be a way of ensuring proper funding for apprenticeships, not just for the quality but for the quantity too.

Oral Answers to Questions

Iain Wright Excerpts

Tuesday 15th September 2015 Commons Chamber

[Nick Boles]

My hon. Friend is absolutely right. There was a National Union of Teachers strike in 2014 that closed 1,500 schools and colleges. It was based on a mandate from two years before, and it had secured only 27% turnout in the ballot. That is wrong. We are changing that, which is why I am delighted that the Bill passed its Second Reading so handsomely yesterday.

[Mr Iain Wright (Hartlepool) (Lab)]

In his written statement of 20 July, the Minister of State for Skills announced that the aim of area-based reviews of post-16 provision would be to create “fewer, larger” providers, and that colleges would remain “independent institutions.” Will the Minister explain how those two statements demonstrate policy coherence or indeed any logic at all? Will he confirm that the only means by which he can reconcile those statements is by cutting off funds to starve colleges into submission. Is that what he will do?

[Nick Boles]

I am slightly surprised at the hon. Gentleman who is a great man and a great Chair of the Business, Innovation and Skills Committee. He knows full well that it has required no arm twisting or strong arming by Government to encourage lots of colleges to combine with each other to form very successful groups. Manchester college and others are great examples of it. It is that kind of sensible consolidation to increase the strength of the college system that we will be encouraging through the area reviews.

Trade Union Bill

Iain Wright Excerpts

Monday 14th September 2015 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests.

In opening the debate, the Secretary of State mentioned one nation Government. Disraeli, the architect of one nation Toryism, passed the Conspiracy, and Protection of Property Act 1875, which decriminalised the work of trade unions and allowed for picketing. I think Disraeli will be turning in his grave at what a Conservative Government are doing tonight. The Bill runs contrary to a British sense of fair play and common sense. It will increase bureaucracy and burdens of regulation, and it will be counterproductive to the Government’s stated aims of improving efficiency and productivity. The Bill will not help us become more prosperous. If anything, it runs the risk of making industrial action more disruptive and the British economy less productive and less attractive to inward investment.

As several of my hon. Friends have already said, the level of industrial action in the UK is historically low. As my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson) said, the average number of working days lost to industrial action since 2010 has been 647,000, in stark contrast to the average in the 1980s of 7.213 million. The past 30 years have seen a historically low incidence of industrial action, as a consequence of the changing nature of the employment market, a reduction in union membership and legislation that, frankly, has restricted union power.

[Mrs Anne Main (St Albans) (Con)]

The right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson) suggested that such events were inconveniences when they happen. Surely the hon. Member for Hartlepool (Mr Wright) can accept that London is brought to its knees on a regular basis, with staff taking two or three hours to get to work and back again and with a great loss of employment and money. These are not inconveniences; they are serious and they need tackling.

[Mr Wright]

Britain has low levels of industrial disputes relative to our main economic rivals—half the EU average, as my hon. Friend the Member for Easington (Grahame M. Morris) said, and lower than the figures in the US, Korea and Canada. If industrial action acting as a material disruption to the running of the modern economy is the premise behind the Bill, that will not bear scrutiny of the evidence.

Clause 2, which introduces a 50% turnout requirement to authorise a ballot, has significant implications. It goes against the British value of common sense and fair play. No other part of the constitutional settlement or democratic engagement requires that threshold. Clause 3, requiring 40% support for action in “important public services” is equally sinister. Again, in no other part of important public services is that required. It is not a requirement for the important public service of electing a local councillor or a Member of Parliament.

The Government argue that a positive impact of the provisions in clauses 2 and 3 will be that unions will work harder to make the case for ballots for industrial action. However, it is far more likely that there will be greater disruption and use of leverage campaigns, such as withdrawal of good will, work-to-rule, protests, demonstrations and unofficial action. Paradoxically, the Bill might result in more working days lost to industrial action and a failure to address the pressing economic challenge of improving productivity. In a modern economy, surely the most appropriate approach is collaboration rather than confrontation.

When General Motors was restructuring its European operations in 2012, the Ellesmere Port car plant would probably have closed had it not been for the close working relationship between management and unions. The ability of Nissan to win the internal competition to build the new Juke earlier this month is testimony to continuous improvement, a drive towards efficiency and constantly rising quality levels, which are possible only through effective collaboration between management and unions.

The Bill pushes us towards a more adversarial relationship between management and the workforce. Does the Minister really think that deals such as those done on behalf of the UK economy with GM or Nissan will be made easier through this Bill when its provisions lend themselves to mutual suspicion, acrimony, work-to-rule and more disruptive industrial relations? The ability of this country to land more inward investment is compromised through the Bill.

The Secretary of State has stated that one of the main themes of his leadership of the Department will be deregulation and we on the Select Committee on Business, Innovation and Skills will certainly want to consider the work of the Government to ensure that businesses are freed from unnecessary red tape, but why has the same approach to deregulation not been applied to the Bill? Under clause 6, the Bill imposes such burdensome regulation that it puts the EU banana straightening compliance team to shame. The extension of the roles and powers of the certification officer will impose additional administrative and financial pressures on unions. There will be a reporting requirement as to whether industrial action took place in the past 12 months, the nature of the dispute and the action that was taken. Unions might not collect such information centrally, so that will add additional bureaucracy. There is also something sinister about the state’s collecting information on what might be private disputes between the employer and workforce that could be resolved relatively early in the negotiation process.

In an economy that is becoming increasingly characterised by unequal, low-skilled and insecure employment with workers employed in small companies or often categorised as self-employed, the challenge of collective bargaining and how unions can work to play a positive role should be considered and encouraged, yet this petty and vindictive Bill does nothing to deal with that. It stops harmonious industrial relations and long-term prosperity. It should be killed by the House tonight.

--- Later in debate ---

[Mr Campbell]

No, I will not.

I sometimes wonder what the shareholders think of those companies. Have they got an opt-out? Have the shareholders got an “in” or “out” vote in the same way as is proposed for the trade unions? Let us be fair. I appreciate that these companies get a lot of money off the Government. I have the figures with me here, showing that these companies are getting subsidies worth £93 billion a year from the taxpayer. We have heard the Tories talking about the taxpayers—the poor taxpayers—but I can tell the poor taxpayers that they are getting diddled. The big companies are getting that much tax off them.

I had a look at the House of Lords.

[Mr Iain Wright]

You will be there soon, too!

Oral Answers to Questions

Iain Wright Excerpts

Tuesday 30th June 2015 Commons Chamber

[Nick Boles]

My hon. Friend reminds us that this is a “one nation” recovery that is benefiting all parts of the country, including his own stunningly beautiful constituency. We are determined over the next five years to create thousands more businesses, millions more jobs and millions more apprenticeships for his constituents and the constituents of all hon. Members.

[Mr Iain Wright (Hartlepool) (Lab)]

May I congratulate the Secretary of State on his appointment and wish him and his ministerial team every success? On Thursday, he announced the sell-off of part or all of the UK Green Investment Bank, but it is unclear what proportion will be sold off. When it was established in 2012, the bank’s impact assessment said it was the only option that addressed market failure and barriers. How have these market failures been fully addressed and how will the Government’s sketchy plans for the most active green investor in the UK not undermine market confidence?

[Sajid Javid]

I congratulate the hon. Gentleman on being elected Chairman of the Business, Innovation and Skills Select Committee and look forward to working with him. Since it was set up three years ago, the UK Green Investment Bank has been very successful. In fact, this year, for the first time, it is expected to turn a profit. I want to make it stronger and even more successful, however, and one of the best ways to do that is to ensure it can access both private capital and private equity—

Skills and Growth

Iain Wright Excerpts

Wednesday 17th June 2015 Commons Chamber

[The Minister for Skills (Nick Boles)]

This has been an excellent debate. We have heard a series of remarkable maiden speeches telling the story of what we all want to see: a nation of opportunity and aspiration, and a nation in which people of every background in every part of the country are able to achieve professional success and, in the case of those hon. Members making their maiden speeches, the ultimate accolade of election to Parliament.

We heard from the hon. Member for East Dunbartonshire (John Nicolson), with whom I have not exchanged words for about 25 years. We met once, many years ago.

[Mr Iain Wright (Hartlepool) (Lab)]

Tell us more!

[Nick Boles]

Sadly, there were other people present.

We heard from the hon. Gentleman that he had been the first person from his family to go to university, and here he is now. He is going to do his constituents proud in this Chamber. I should like to add a note of thanks for his generous tribute to his predecessor, Jo Swinson, who was probably the Conservatives’ favourite Liberal Democrat.

We also heard from my hon. Friend the Member for Derby North (Amanda Solloway), who will be relieved to hear that I am not going to recall a meeting of 20 years ago with her. She spoke of the idea of a nation of aspiration that had given her the opportunity, despite having had an education that had not given her great qualifications or a degree, to succeed in retail and manufacturing and then to find her way on to these green Benches. Having heard her fantastic speech, I can assure her that she will do much more than double her majority in five years’ time.

We heard from the new broom in Bradford East, the hon. Member for Bradford East (Imran Hussain). His grandfather found opportunity in Bradford’s mills. How proud he would be today to see that his grandson had not only qualified as a barrister in the courts of the United Kingdom but now been elected to Parliament.

My hon. Friend the Member for Northampton South (David Mackintosh) spoke eloquently and with the experience of a local government leader on the role of education in regeneration and, in particular, on the project that he has spearheaded—the Northampton Alive regeneration scheme. I have no doubt that he will never give any of his constituents reason to follow the example of the assassin of one of his predecessors.

The hon. Member for Glasgow Central (Alison Thewliss) spoke very well of the work of the Scottish Government on improving skills training. I have heard good reports about the Scottish apprenticeship programme from employers who provide apprenticeships in all parts of our country. I believe in learning from anyone and everyone, and I would be keen to learn from Scottish Ministers what they have found to be successful. I am planning to visit the hon. Lady’s fair city this summer, and I shall be sure to visit the area of Toryglen, even if I am the only Tory in it.

Following this debate, I wish I could report that Her Majesty’s Opposition were reflecting on the result of the election and on the messages sent to them, ever so politely, by the British public. I wish I could say that they were approaching that subject with humility and an open mind, asking themselves whether there was anything in their presentation before early May that they should perhaps revise. Sadly, however, that was not to be. We heard groundhog day of the Labour story. All we heard from Opposition Members was an endless series of increasingly hysterical attacks on cuts in public spending.

I have a lot of time for my opponent, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne). I believe he is a good and thoughtful man, and that he was a good and thoughtful Minister in his time, but he can tell his colleagues why those public spending cuts were necessary.

Oral Answers to Questions

Iain Wright Excerpts

Thursday 26th March 2015 Commons Chamber

[George Freeman]

My hon. Friend is absolutely right, and I pay tribute to his doughty campaigning on this issue throughout this Parliament. It is part of £460 billion package, with £12 billion in city deals and local growth funds and £1 billion in broadband. As he says, this is alongside our investment in vocational training and apprenticeships in engineering to put our economy back on its feet.

[Mr Iain Wright (Hartlepool) (Lab)]

The Minister mentioned the CBI, and Katja Hall of the CBI has said:

“The vast majority of businesses back the creation of an independent body to assess the UK’s long-term infrastructure needs”

as a means of finding

“a new way to agree upon and then consistently deliver the improvements we’ll need over the next fifty years—not just the next five.”

EEF has said that

“good infrastructure is an essential building block for the UK’s long-term competitiveness and growth”,

and has called for a permanent infrastructure body to act as a “game changer”. This is not, as the Minister said in an earlier reply, “bureaucracy”, so will he respond to the question of my hon. Friend the Member for Kingston upon Hull North (Diana Johnson)? In the light of overwhelming business support and to stop decisions on our country’s long-term future prosperity being kicked into the long grass, will the Minister back British companies and support Labour’s plan to set up an independent national infrastructure commission?

[George Freeman]

This is a bit rich from a party that neglected our infrastructure for 13 years and left us with gridlock Britain. Let me repeat: £460 billion-worth of investment amounts to the biggest infrastructure programme since Victorian times—and it has been welcomed. As I said, the CBI’s John Cridland said that businesses in the north would be “encouraged”. We have set up the National Infrastructure Advisory Board and we do not need another commission. What we need is to continue with the progress of investments. Let me quote Simon Walker from the Institute of Directors:

“The Chancellor was right to resist the temptation of politicised giveaways, and focus instead on long-term investment in infrastructure, science and efforts”.

We are making progress.

Careers Advice (14 to 19-Year-Olds)

Iain Wright Excerpts

Wednesday 25th February 2015 Westminster Hall

[Stephen Lloyd]

That is very important. To my mind, there are a number of things to consider. We must ensure that the Government of the day, locally, regionally or nationally, focus on that area and applaud success. Nothing is truer in life than that success follows success. I would like to see more and more young people who have been through the process, either as apprentices or at university, as ambassadors going into schools and working with local companies.

I was talking to a constituent the other day about long-term youth unemployment, the challenges of NEETs and so on. As a constituent of mine, he knows that is something I am very focused on—it is one of things that got me back into politics, as it happens. I told him that there is no point in me, a middle-aged, posh bloke in a suit, going in and talking about apprenticeships—it just doesn’t work! Although I profoundly believe what I say, and a lot of young people in Eastbourne know me, so they know I am absolutely passionate about the issue, they would listen so much more to a 19 or 20-year-old who had been through the process and was really fired up. People hear so much better those who look like them and sound like them. That is something I would like to see much more of.

Improved access to careers hubs, where colleges, schools, universities, Jobcentre Plus, and local authorities come together—many of us have such hubs in our constituencies—is a very good way of working and lifting morale and energy locally. I urge the Government to keep making progress on that, and I look forward to hearing the views of both Front Benchers.

However, as good and necessary as hubs are—I use them a lot, as do many of my colleagues—I am convinced that one good, trained careers officer who is passionate about what they do can change the world of career opportunities for young people more than anything. A careers officer who offers a real career path, and who is incentivised to find people jobs or good solid training, can change people’s lives. One day, if I am still an MP in x number of years—

[Mr Iain Wright (Hartlepool) (Lab)]

Days.

[Stephen Lloyd]

Who knows? I am an optimist. I am a Liberal. I would love to find that we hear more about careers officers who have transformed people’s lives. All of us here probably know one or two teachers who have done that, who have changed our lives in some way—I certainly do. I would love to be able to say in this Chamber, the House or at an awards presentation that people are talking about careers officers who have changed their lives, as they indeed can. A careers officer who has tremendous passion for their task and a comprehensive knowledge of the range of different opportunities can be a game-changer. It is our fault that that has not happened—we are the MPs; we are the Government—and it is about time we stepped up to the challenge. On that note, I look forward to hearing my colleagues’ contributions.

--- Later in debate ---

[Mr Iain Wright (Hartlepool) (Lab)]

It is a pleasure to serve under your chairmanship again, Mr Williams. I thank the hon. Member for Eastbourne (Stephen Lloyd) for securing this excellent and important debate.

I come at the matter from two perspectives. My key priority is the people of Hartlepool. There is huge potential in my constituency. We have a nuclear power station providing well-paid jobs, and there is the prospect of an additional power station in the next 10, 15 or 20 years. We have got Nissan up the road. We have got Hitachi in Newton Aycliffe. We have the largest concentration of chemical engineering anywhere in western Europe, and we have the potential for carbon capture and storage. There is massive opportunity in my local economy, and yet the Office for National Statistics report from last year on young people in the labour market shows that Hartlepool, alongside Wolverhampton, has the largest number of young people unemployed and outside education or training anywhere in England and Wales. Why is that the case? Why is there such a mismatch between potential, skill shortages and the level of youth unemployment? Careers advice has a role to play in making sure that we address that mismatch.

My second consideration is that for the last 11 months of the previous Labour Government, I was the Minister in charge of 14-to-19 reform and apprenticeships, and I had responsibility for information, advice and guidance. I was conscious that in far too many cases, careers advice was seen as a secondary activity—often even a nuisance—that took time and attention away from the core business of learning. Careers advice was often delivered as a one-off event in a single afternoon. I was keen to see a new approach, which was the purpose of the new strategy for information, advice and guidance published in October 2009. I am not suggesting that there was ever a golden age for careers guidance, but as a Minister I was keen to push it up the agenda.

As we have heard from my hon. Friend the Member for Scunthorpe (Nic Dakin), the provision of careers advice to young people under this Government has got markedly worse. Reductions in funding and personnel, increases in fragmentation in the school system and organisational change, such as the dismantling of Connexions, have meant that young people often face real barriers to navigating what is on offer. Good careers advice can also be an important tool of effective social mobility. A young person should get good careers advice regardless of where they live, their background, who their parents are or who they know. That is often not the case, however, and it is a question of who they know and their connections when it comes to getting into a good career or profession.

The CBI has said that 93% young of people are not getting the careers information that they need, but good careers information, advice and guidance are needed more than ever, because the certainties of the past have gone. In my patch, my grandfather’s generation could leave school at the age of 15 on Friday and be working in the steelworks or the shipyard the following Monday, and they would stay there for 40 years. That certainty and that clear route have gone for ever. The futurist Thomas Frey has said that 60% of the best jobs in the next decade have not even been invented yet. At the same time, technology threatens a third of all UK jobs over the next 20 years, especially at the low-skilled end of the employment market. As Andreas Schleicher of the OECD has said,

“because of rapid economic and social change, schools have to prepare students for jobs that have not yet been created, technologies that have not yet been invented and problems that we don’t yet know will arise.”

In those circumstances, there needs to be much greater alignment between education policy and business and industrial policy, with effective careers advice and meaningful engagement between businesses and schools acting as the bridge, but the Government have to help. Government policy is not addressing the issue, and a narrowing of the curriculum by Ministers means that creative learning, problem solving and team building in the widest sense—enterprise education, in the widest definition, is required for the knowledge-based economy of the 21st century that will allow us to compete in the modern world—are not being championed, and careers advice is being downgraded.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

The hon. Gentleman is right to say that there was no golden age. The careers system that he left behind at the end of the Labour Government was pretty weak. Does he agree that there has been a failure to change the incentives in order to ensure that all schools provide first-class careers advice and guidance, as a small number currently do? One of the major things is to ensure that, in places such as Hartlepool, young people get qualifications that add value. He will be delighted, as I am, to see the number of young unemployed people aged between 18 and 24 in his constituency go down from the 1,200 when he left government in 2010 to, I think, 615 according to the latest figures. That is fantastic news, and we are seeing that transformation across the country under this Government.

[Mr Wright]

The hon. Gentleman will understand that we want a universal and properly resourced careers service that is staffed by committed and professional people with the necessary breadth of knowledge and experience to be able to say, “This is what the future looks like. The potential for you, as a young person, is huge. This is what’s on offer. Let me guide you through it.” That is not happening at the moment. I have six specific, brief points.

[Hywel Williams (in the Chair)]

Brief.

[Mr Wright]

I will be brief, I promise. First, this debate is about 14-to-19 careers advice, but providing appropriate careers advice and information about the future world of work needs to come at an even younger age. We have a pressing need to encourage more women into engineering, but all the evidence suggests that girls are put off or are pushed into gender stereotypes or pigeonholes at primary school. Encouraging and motivating eight, nine and 10-year-olds is a vital prerequisite to good engagement and effective careers guidance for 14 to 19-year-olds. What is the Minister doing on that?

Secondly, work experience is not given the importance that it deserves, and young people from families who do not have connections at the golf club, or whatever, will miss out. I was lucky, because I had two weeks at a firm of solicitors when I was 16. Those two weeks were invaluable in convincing me that there was no way on God’s holy earth that I was going to have a career in law, but being able to dip a toe in the water and being able to try different things is important. The Government need to recognise that and ensure that work experience is given more priority.

Thirdly, as the hon. Member for Stroud (Neil Carmichael) mentioned, destination data and employment and training routes for young people should be considered a key part of school reporting and evaluation, and they should even form part of the remuneration packages of the head teacher and senior school management. We should ensure that a wide and impartial range of advice is given, rather than pushing pupils towards a certain end, but that is not happening at the moment.

Fourthly, face-to-face guidance is effective and wanted by young people. Online research is valuable, but it should not be seen as a substitute for face-to-face discussions, particularly with professionals. The Government need to address that.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Will the hon. Gentleman give way?

[Mr Wright]

I am conscious of time, but I will certainly give way.

[Mr Campbell]

I thank the hon. Gentleman. Does he agree that the sooner face-to-face advice occurs, the better? All too often, face-to-face advice is only a one-off and very late in the day at age 15 or 16. It should happen early in secondary education.

[Mr Wright]

The hon. Gentleman is absolutely right that face-to-face advice should be a key thread running through young people’s education, evaluation and experience.

Fifthly, impartial advice is important, and it is not given in far too many cases, particularly for 11 to 18-year-olds. Schools may be pushing pupils towards the sixth form when they would rather consider a vocational or apprenticeship route.

Sixthly, we should value careers professionals. As the hon. Member for Eastbourne said, they are vital professionals who can navigate young people through a tricky and complex world. We should treasure them a lot more. For far too long, careers advice has been a secondary consideration, somehow as an add-on. In the modern world of work, we need a knowledge-based economy. We do not know what the future looks like, so careers advice needs to be much more central to this country’s education offer.

Oral Answers to Questions

Iain Wright Excerpts

Thursday 12th February 2015 Commons Chamber

[Greg Clark]

Anyone who was born on Teesside cannot fail to be aware of the importance of the steel industry. It is an important part of our industrial base, and this Government have made significant strides in supporting it. For example, we have reduced the energy costs that would otherwise have been incurred. The hon. Gentleman will know that my right hon. and hon. Friends have regular discussions with representatives of the steel industry and will continue to support it.

[Mr Iain Wright (Hartlepool) (Lab)]

The hon. Member for Somerton and Frome (Mr Heath) rightly said that the food and drink manufacturing sector was the largest manufacturing sector in this country. It employs 400,000 people and invests £1 billion in innovation. There is also huge opportunity for further growth through innovation, but the Food and Drink Federation’s calls for a food and drink manufacturing council, with collaboration between the industry and the Government to foster innovation, have fallen on deaf ears. The phrase “food and drink manufacturing” is not even mentioned in the Government’s agri-tech strategy. Why have the Government chosen to ignore this innovative and high-potential manufacturing sector, and how will the Minister make amends?

[Greg Clark]

We have not ignored it. In fact, I had the privilege of attending the Agri-Tech Leadership Council, which involved many of our key players across the food and drink industry and my colleague, the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Mid Norfolk (George Freeman) and the Minister in the Department for Environment, Food and Rural Affairs, Lord de Mauley. We met representatives of the industry precisely to plan and implement the strategy that the sector wants to put forward.

Inequality

Iain Wright Excerpts

Thursday 27th November 2014 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

I congratulate my right hon. Friend the Member for Oldham West and Royton (Mr Meacher) on securing what has been a short but perfectly formed debate, and the Backbench Business Committee on agreeing to it. He is right to point out that inequality is one of the most pressing issues facing our economy and society. It is clear that the economy does not work for many working people. Galloping advances in executive pay and real-terms pay cuts for most people in work does not suggest an economic model that is performing well or efficiently or providing the greatest benefits to the greatest number of people.

My right hon. Friend mentioned that for the past 30 years or so the prevailing model has been the shareholder value model, which was supposed to maximise returns to the shareholder. The argument goes that if there is an alignment between the interests of shareholders and executives, perhaps in the form of share option incentive plans, executives would act in the interests of the owners of the company. Evidence shows that that theory has been found wanting. Directors of large companies are often remunerated far in excess of the performance of the company that they lead or the extent to which they have created value for the firm’s stakeholders.

Don’t get me wrong: leading a company requires enormous skill and judgment, and those men and women—sadly, it is still predominantly men—should be rewarded for bringing such skill and judgment to bear. If that skill results in a company being transformed and improving beyond the norm, that should be recognised and appropriately remunerated; and as my right hon. Friend eloquently said, for all the talk of aligning shareholder and executive interests, ironically, executives have been extracting value from large companies for themselves at the expense of the company, its shareholders, its work force and ultimately its society. Let me illustrate this point.

In 1980, the median pay of directors in FTSE 100 companies was £63,000. At the time, median pay across the country was £5,400. In 2010, the median pay of directors in FTSE 100 companies was £2.99 million, while median wages for the rest of the country was £25,900. That meant that the ratio of executive wages to the average wage moved over a generation—30 years—from 11:1 to 116:1. And it is not getting any better, despite the recession, and despite stagnating economic activity.

The High Pay Centre revealed earlier this year that FTSE 100 chief executives received remuneration worth 143 times the average wage. This single fact encapsulates everything that is wrong. It takes a chief executive three days to receive what a worker on average wages earns in a year. That is at a time when there is an explosion in zero-hours contracts and greater insecurity at work for many people. Incomes are lower on average now than they were a decade ago, and the worst off and the lowest paid have seen the biggest falls, leading to a rise in in-work poverty that we have not seen in this country for decades.

I pay tribute to my fellow north-east MP, my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), who made a passionate speech and is well versed in the problems of her constituency. She will know that figures derived from the Northern TUC show that our region has a particular problem in relation to low pay. In Hartlepool more than half of women working part time are paid below the living wage. She also mentioned the impact of spending cuts on general demand in a local economy. The north-east has borne the brunt of that. In Hartlepool we have lost £680 per household as a result of the austerity measures. That money has been taken away from the economy, exacerbating inequality in this country. We did not have a food bank in Hartlepool in 2010. We do now.

One in five workers in this country—some 5.2 million employees—are not paid the living wage. That has increased from 3.4 million workers in 2009. The UK has the second highest rate of low pay in the OECD, and lower levels of productivity than our main competitors. All this provides a compelling argument that inequality is not producing a more resilient or a more competitive economy. It is clear, as I said, that the economy does not work for most people. As my hon. Friend the Member for City of Durham said, we will succeed in the global economy only if these issues are tackled and if we address low pay and poor productivity, and work to ensure a more equitable distribution of wages.

My right hon. Friend mentioned an important point—perhaps all this would be excusable if a growing gulf between average pay and executive remuneration reflected superior company performance. The argument goes that talent on this scale, which is often global in its outlook, requires a premium in remuneration. Superstar pay packages attract super talent, which in turn incentivises superstellar performances. I have never quite understood, though, how executives are expected to be motivated to work harder by means of ever escalating pay, but workers on average and low earnings are supposed to be motivated by greater insecurity and no pay increases at all. But the evidence suggests that there is no correlation between executive pay and company performance—quite the reverse.

An article by Michael Cooper, Huseyin Gulen and Raghavendra Rau concluded that firms that pay their chief executive officer a sum within the top 10% of pay earn negative returns of –13% over the next five years. Throughout the whole of 2014, the FTSE 100 has fallen in value by 0.02%, even though executive pay has risen. The model of aligning executive pay with shareholder returns is broken, and the executives are the ones who are benefiting at the expense of others.

There appears to be a correlation between unequal and disproportionate reward at the top and inefficient and dysfunctional performance by the organisation. Far from securing star performers who can transform an organisation and motivate their work force, the more a firm’s executive pay exceeds the average in that company, the higher the rates of industrial action, staff turnover and work-related stress in that company. The evidence suggests that inequality is a disincentive to success, hard work and loyalty, as workers feel resentful that bosses at the top are not earning their remuneration. That breeds discontent, lower productivity and ultimately inferior company performance.

It is important that there is increased transparency and scrutiny in this area. I appreciate that the Government have made some progress in the past couple of years with its reforms of corporate governance and executive remuneration, but I think the Minister would agree that more needs to be done. That is why we believe that large firms should publish the ratio between the pay of their highest earner and that of the average employee in the organisation. I believe that is Liberal Democrat policy, and I hope the Minister will confirm that and say that it will be Government policy.

We believe that employees should be members of remuneration committees, ensuring that the voice of the workplace is heard when executive pay is set. We would reintroduce the 50p rate of income tax for the highest earners. We would raise the minimum wage to £8 an hour by 2020, bringing that rate closer to average earnings.

John Maynard Keynes said:

“The businessman is only tolerable so long as his gains can be held to bear some relation to what, roughly and in some sense, his activities have contributed to society.”

This debate has shown, as has evidence collated over the past 30 years, that those gains are often far in excess of what those activities have contributed to society and to those executives’ companies. A more unequal society results in a less productive economy. We in this House should resolve to change that.

--- Later in debate ---

[Mr Iain Wright]

I am glad the Minister has put that clarification on the record. She is galloping away somewhat, rather like executive pay over the past 30 years. May I bring her back to the Government’s reforms? In respect of binding votes, how many companies have had to change their pay policy as a result of shareholders voting against it?

[Jo Swinson]

I will talk about the particular reforms in a moment. There are two ways in which the Government’s reforms can have an impact on executive pay and, therefore, company behaviour when agreeing directors’ remuneration. One way, obviously, is to have a binding vote that a company could lose, and as a result the pay policy would not go forward. The other way—it is an important one—is that companies, because they know they will face a binding vote on executive pay, will be incentivised to have more detailed discussions with investors and shareholders in advance of the annual general meeting. I would not want us to get into a situation in which we thought that it was only if lots of votes were won that the reforms were not successful, when actually it might be a sign that there is much more engagement, which in itself would be a sign of success.

[Jo Swinson]

I certainly think that the points the right hon. Gentleman made about involving the work force are important. That is why our reforms require that it be set out how employees have been involved and consulted. It is not a prescriptive approach, but it requires that to be taken into consideration. Indeed, the Government have tried in other ways to influence corporate governance. For example, the work we have done on employee ownership has supported different types of ownership and engagement models, through various changes to the tax system and the provision of materials on how to make it easier for companies to convert to employee ownership models, so that employees can be much more involved in the running of their companies. We know that that can have real business benefits, because employees buy much more into the success of the company. That also starts to deal with some of the productivity issues that the hon. Member for Hartlepool mentioned.

[Mr Wright]

The Minister is making a very important point, and I really agree about the need to ensure that employees have a say in the running of their businesses, because that improves the value of those companies. Could that be formulated within corporate governance? Does she agree with the notion of having employees on remuneration committees?

[Jo Swinson]

I think there is a difference between recognising and supporting business benefits, and prescribing in legislation or regulation exactly how companies should go about doing that. There is a lot of agreement on the advantages for companies, but I do not think there is much agreement with the idea that the best way is for the Government to be very prescriptive, stating, “This is exactly what companies must do, and this is the only way to do it.” There are different ways in which companies can achieve that level of engagement successfully. It might be through employee representation on the board or remuneration committee, but there are other ways in which that can be done. We should enable companies to find the way that works best for them.

We are monitoring the impact of the reforms we are undertaking in the context of the 2014 reporting and annual general meeting season. We want to understand how companies have interpreted and applied the regulations, what trends can be observed in the remuneration packages that have been put forward and how shareholders have responded. We intend to publish the key findings from that work shortly, along with any policy conclusions that flow from them. We have always said that the policy will remain under review, because we want to see how what we have implemented works in practice.

Of course, it is useful for the Government to take on board and consider interesting proposals made in the House, in the context of looking at how our reforms are actually working. We know from the evidence already available that companies are increasingly responding to shareholder expectations on remuneration. There are positive signs of restraint on levels of directors’ pay and a substantial number of companies have simplified their remuneration policy, linking it much more closely to measurable performance over longer periods of time—that is crucial—to try to get away from the short-termism culture.

There have been reports in the media about rising pay, but often they reflect the impact of previously agreed pay awards. What matters most in assessing the impact of the reforms is what pay is being awarded under the new regime. The latest evidence shows that the median total remuneration awarded to FTSE 100 CEOs fell by 5% in 2012 and by a further 7% in 2013. Some 35% of those CEOs and 30% of the executive directors did not receive a salary increase at all last year. The median salary increase for FTSE 100 executive directors overall was 2.5%. Only 16% of companies gave their directors a salary increase of more than 3%; in the previous year that figure was 25%. The trend shows that pay is coming down, but obviously we will want to look at all the evidence that comes forward before publishing those findings and having a clearer picture.

The right hon. Member for Oldham West and Royton talked about the importance of engaging investors in the process. That ties in closely with the work my right hon. Friend the Business Secretary is doing on long-termism, particularly the Kay review, because investment funds, pension funds and so on have a crucial role to play as active investors. Important campaigning bodies have certainly achieved some success in getting much more engagement from those investors, so that they can properly hold to account the decisions on pay.

On the specifics of pay ratios, overall ratios certainly give us a picture of how things are across the economy, but I suggest a degree of caution about using a ratio between the top and the bottom for paid employees within a company. We considered that very carefully when we introduced the reforms. We decided not to mandate that ratio, as set out in the motion. Transparency is welcome, but we have to guard against potentially misleading information when that is broken down between the top and the bottom.

Obviously, that will depend on what sector the company is operating in and the type of staff working for it. For example, a large investment bank that outsources all its unskilled work could end up having quite a low ratio for pay between the top and the bottom, but a large retailer with a large number of relatively unskilled employees would have a much bigger ratio. The retailer could none the less be paying above the living wage and treating its employees pretty well. It might look as though it is the investment bank that should be polishing its halo, but perhaps that is because it outsources its unskilled work to be done in less favourable conditions. Therefore, we have to be slightly careful about unintended consequences, because some factors could mask what is actually happening. Comparing top and median pay might give a more realistic and meaningful figure. The hon. Member for Hartlepool is right to point out the Liberal Democrat policy in that area—he is undoubtedly an avid reader of Liberal Democrat policy documents, as I encourage all hon. Members to be.

The hon. Member for City of Durham (Roberta Blackman-Woods) raised a number of issues that are very important as part of the discussion on inequality and pay policy, particularly the pay gap for women. At the end of last week we heard the positive news that the pay gap is closing. However, we need to be cautious about celebrating that too much when we still have such a significant pay gap. Let us welcome the fact that it is being reduced, but also recognise that our aim has to be to eliminate it.

The hon. Lady’s concerns about part-time work are also important. There is far too much stigma within the workplace about how valuable somebody can be if they work part time. Very important work is being done by organisations such as Timewise to highlight the fact that people in very senior roles can work part time and do their jobs perfectly successfully, so we should be able to deal with some of those issues.

The hon. Lady also mentioned the living wage. We obviously have the national minimum wage, which is a floor, or a basic standard. Of course, this year we saw the first above-inflation rise in the national minimum wage since 2007, which is very welcome. That gives full-time workers a £355 increase each year. We want that to continue, if possible, without negatively impacting on employment. My right hon. Friend the Business Secretary has asked the Low Pay Commission to look at considering above-inflation rises in the national minimum wage, and we hope that, with a growing economy, that can be sustained. Of course, at the same time we have focused on helping people on low pay by cutting income tax by £800 a year, taking 3.2 million people on the national minimum wage out of paying income tax. We have done a significant amount, but we want to continue by encouraging employers to pay above the national minimum wage and to recognise that it is a minimum. Very profitable and successful companies should recognise their responsibilities to their employees, which might mean that they should be paying more. I welcome the fact that many employers are now turning into a positive the fact that they pay more than the minimum wage and badge themselves as a living wage employer. Of course, they will then be able better to compete for talented staff and get business benefits.

The hon. Lady is right about happiness and well-being. In 2010, the Prime Minister said that the Office for National Statistics would be collecting data on well-being and happiness. That was not met with universal acclaim in some sections of the press. I seem to recall that the Daily Mail was not necessarily delighted by the suggestion. I, for one, was delighted, having set up the all-party group on well-being economics and long campaigned for the importance of recognising that people, yes, care about their income and the size of the economy, but also care about the health and happiness of themselves and their loved ones. The more we recognise that in our policy making and in what we measure, the better.

The hon. Lady said that she did not know what had happened to that work, so I will update her. The ONS has been collecting the information, and about 250,000 people a year are questioned. As a result, a rich databank is being built up that can be broken down in interesting ways across different geographical areas, and between men and women and different age groups, so as to be able to assess the impact of policies and see what is happening in different parts of the country in different groups.

We recently announced the setting up of a “what works centre”—a research think-tank that the Government are supporting to analyse how different policies impact on well-being. From a BIS perspective, one of the key strands of this work is about well-being in the labour market and the workplace and what drives it. We recently published research that we have undertaken on that. A range of factors impact on workplace well-being. Obviously, pay is one, but there are also things such as the variety in someone’s job, whether they feel that they get to use their skills, whether they have a degree of autonomy, how they go about their job, and their sense of fairness in the workplace, which very much ties into this debate. I am glad to say that very many businesses are also engaged in this agenda and recognise that continuing to engage with the well-being of employees leads to better business performance.

We recognise that this is a very significant issue, and we have taken action. We do not want to see rewards for failure. A ratio cap as set out in the motion could, in its purest sense, have unintended and perverse consequences. Early signs of the response to our executive pay reforms are encouraging, and we will review their impact and publish the findings. We will continue to work to ensure that pay policies become fairer, and also support low-paid workers by cutting income tax. I know that we will return to this topic in the House. I thank the right hon. Member for Oldham West and Royton and the Backbench Business Committee for giving us the opportunity to discuss it today.