Ethnicity Pay Gap

Kirsten Oswald 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.

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[Kirsten Oswald (East Renfrewshire) (SNP)]

It is a pleasure to serve under your chairship, Mr Hosie. I am grateful to the petitioners for allowing us to have this debate.

As someone with a background in human resource management, I fully support the introduction of ethnicity pay gap reporting as part of the measures we need to tackle pay discrimination. Transparency is essential when we expect organisations to deliver a particular outcome. The Chartered Management Institute confirmed that 80% of managers surveyed agree on the need for mandatory ethnicity pay gap reporting for large organisations.

Fifty years of sustained effort to deliver gender pay equality demonstrate the importance of transparency. The Equal Pay Act 1970 decreed that men and women in the same employment, doing equal work, must receive the same pay. In 1993, the Pay Equity Project highlighted that women’s earnings remained significantly lower than those of male colleagues, due to factors such as undervaluing occupations with a largely female workforce and the effects of women’s generally greater caring responsibilities. Those factors were reinforced by institutionalised discrimination, such as by Glasgow City Council, which, after a decade-long battle by women workers and a change in administration, paid out more than half a billion pounds in compensation.

Even if direct discrimination is addressed, other factors will drive the ethnicity pay gap, and those can only be properly understood if the data is captured and analysed. The Office for National Statistics recently reported that in some circumstances, among recently recruited full-time employees, women might now be paid more than men. However, across the whole workforce and the employment cycle, women’s earnings remain below those of male counterparts. We have some way to go.

Despite that, the forces of reaction pounced. Bright Blue, which is backed by the new Secretary of State for what used to be the Ministry of Housing, Communities and Local Government—I am not sure of the Department’s new name—and others, says that the policy job on gender pay is done and we should now leave it to business. However, as with other things said by supporters of this Government, that is far from the case. The call for inaction in the face of continued inequality is all too predictable. In fact, the lesson to learn from half a century of pursuing gender pay equality is how enduring entrenched inequality can be.

We can also see the variety of tools and arguments deployed by those who defend the status quo or, as with this Government, wish to drag us back to an earlier age. I was disappointed, although not surprised, to see the findings on ethnicity pay reporting from the Cabinet Office’s hand-picked Commission on Race and Ethnic Disparities. The commission hid behind data complexity to make recommendations only for organisations that choose to publish figures—“If you think you are doing well, then tell us. If you are doing badly, you can keep that quiet.” The Government have seized on those findings, which stand in stark contrast to the meticulous work and recommendations of Lady McGregor-Smith, one of the few women of colour to head a FTSE 100 company, who got it bang on when she said:

“Until we know where we stand and how we are performing today, it is impossible to define and deliver real progress.”

She has been backed by Peter Cheese, the chief executive of the Chartered Institute of Personnel and Development, who said:

“We know that gender pay gap reporting has driven greater transparency and accelerated progress, and we believe the same is needed for ethnicity pay reporting.”

That is why the Government’s delay on this issue—including their failure to publish the responses to their 2019 consultation—is so disappointing.

The combination of Brexit and the pandemic has massively disrupted the world of work and there is more to come, including a likely spate of redundancies when furlough ends. Research by the Institute for Public Policy Research shows that ethnicity has been a major factor in the adverse economic impact of the pandemic. Unless we act now, it may also be a hidden factor in the distribution of reward during the recovery and beyond.

We already know that many on the frontline during the pandemic were among the lowest paid. Ministers have bandied the word “hero” about a lot, at the same time as presiding over the creation of a multi-tiered employment market where many more people stand to lose their status and rights as employees and be treated as freelancers choosing to work fewer hours. Others are simply under-employed and at the beck and call of zero-hours paymasters.

That multi-tiered workers’ rights policy is being used to argue that the labour market is too complex for ethnicity pay gap reporting to be effective—how convenient. Of course, if the Government brought forward their persistently delayed employment Bill, they could sweep away some of these anomalies and return to workers the rights enjoyed by previous generations. They will not, of course, because in addition to returning us to imperial measurements, Ministers want to see the rights of workers across large swathes of the economy revert to the 19th century. Instead of standing in line waiting to be picked for a day’s work, workers now anxiously wait for an email or text to say whether they have a shift.

Even before the pandemic, the CBI, the TUC and the Equality and Human Rights Commission were calling for ethnicity pay gap reporting to help us better understand and address pay inequality. Even the Investment Association recognises the benefits of mandatory ethnicity pay gap reporting as a means of helping businesses to demonstrate that they are generating sustainable long-term value. It also identifies lack of transparency as a barrier to change, highlighting that only 27% of FTSE 100 companies publish even the ethnic diversity of their board. That reinforces Lady McGregor-Smith’s comments on the lack of information from FTSE 100 companies available to her inquiry, and really it should end any pretence that significant progress can be made on a voluntary basis.

If we are to tackle the ethnicity pay gap, we need to do so from the root cause of much of the gap, which is continued discrimination. The UK Government need to take a leaf from the books of: Zara Mohammed, the general secretary of the Muslim Council of Britain, who has a laser-like focus on employment inequality; or the team led by Peter Hopkins of Newcastle University, who examined the experiences and perceptions of young Muslims in Scotland, some from my constituency—most young people from black and minority ethnic communities are proud of their Scottish identity, but that report left no doubt about the extra challenges they face, including in the workplace—or perhaps the Young Women Lead committee, supported by the Scottish Parliament, which examined the transition from education to employment of young ethnic minority women. Those are some of the voices that we need to hear on the issue.

We also need to see action. The difficulty, however, is that many of the powers to act on the issue are held not in Scotland, but here in Westminster. The Scottish Government are doing what they can to provide leadership, in stark contrast to the inaction of the UK Government. The Scottish Government will extend the requirement for Scotland’s public authorities to publish gender pay gap information to include disability and ethnicity reporting, and will ensure that the equal pay statement covers those issues. They are also developing an ethnicity pay gap strategy, supporting employers in Scotland to evidence how different communities are represented in an organisation across different pay bands. They will soon launch an immediate priorities plan setting out actions to tackle structural disadvantages faced by BAME communities, to act as a foundation for a long-term anti-racism programme.

Those are welcome actions, but I will draw to a close by repeating the words of Lady McGregor-Smith:

“Until we know where we stand and how we are performing today, it is impossible to define and deliver real progress.”

That is why we need the UK Government to step up to the plate, to deliver mandatory ethnicity pay gap reporting and to do so with the maximum possible coverage. Either that or they should get out of the way and pass the powers to the Scottish Government and let them make progress on delivering the fairer Scotland that we know is possible.

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[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.

[Kirsten Oswald]

I am interested in what the Minister is saying. Can he clarify something: are the Government working through that methodology? What specifically are they doing, and when do they expect to have a system in place that does take account of the complexity that we all acknowledge but which absolutely must not get in the way of our making progress?

[Paul Scully]

I am grateful to the hon. Lady for letting me progress with my speech, because that is exactly the point that I was coming to.

We have continued to work with businesses and other organisations better to understand the complexities identified through the consultation. More recently, we have been working with the Business in the Community app and race at work charter members. My right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) spoke about people and businesses crying out for reporting. The number of charter members is currently 700, which is up from 300 this time last year, so there is clearly a big push of people signing up to the charter. One of the points in the charter is to collect data on ethnicity and the ethnicity pay gap. This work has looked particularly at action planning and what participating organisations believe to be the key drivers of the ethnicity pay gap: culture and leadership; recruitment; retention; and progression.

In parallel, earlier this year, the Commission on Race and Ethnic Disparities published its report, setting out a road map to racial fairness in the UK, which made an important contribution both to the national conversation about race and to the Government’s efforts to level up and unite the whole country. In the report, the commission pointed to the statistical and data issues that could affect ethnicity pay reporting and suggested a voluntary approach. It made a further recommendation:

“The Commission recommends that all employers that choose to publish their ethnicity pay figures should also publish a diagnosis and action plan to lay out the reasons for and the strategy to improve any disparities. Reported ethnicity pay data should also be disaggregated by different ethnicities to provide the best information possible to facilitate change. Account should also be taken of small sample sizes in particular regions and smaller organisations.

To support employers undertaking this exercise, the Commission recommends that the Department for Business, Energy and Industrial Strategy (BEIS) is tasked with producing guidance for employers to draw on.”