Employee Shareholding and Participation in Corporate Governance

Lord Bishop of St Albans Excerpts

Thursday 11th October 2018 Lords Chamber

[The Lord Bishop of St Albans]

I thank the noble Lord, Lord Haskel, for securing this debate. With such limited time, I shall make just a few comments about the purposes of business in general and then make one or two observations about the very specific themes raised in the debate.

All too often, business and commerce are viewed as though their main aim was simply to make the most money possible. This rather reductionist view of business fails to take into account wider questions raised in Christian theology, as well as by many others, such as how everyone can contribute to the common good, issues of justice and fairness, and particularly the sort of values we wish to celebrate and promote as a society. The best businesses, I believe, are those that balance the need to make money with a high priority on the flourishing and thriving of their workforce and a concern for human dignity.

Unfortunately, debates such as this can all too easily focus on differences between left and right. Looking at who is speaking in this debate and who is not, in terms of political parties it seems we have something of an echo of that here, sadly. My most reverend friend the Archbishop of Canterbury wrote recently in a much-publicised book:

“God is neither left-wing nor right-wing but stands above all such forms of political or economic ideology. God relates to human beings, loves the poor, the widow and the orphan, endows the earth richly with goods and fruitfulness enough to satisfy every human need, and judges our selfishness and self-seeking”.


In Christian theology, work is a positive activity and not something to be scorned or avoided. That is why the concept behind universal credit, for example, has been supported by the Church: making work pay is a good thing, even if we have serious concerns about the practicalities of its implementation. Nevertheless, the most reverend Primate was right to observe that we have a crisis of capitalism. Anger at our economic system, brought into sharp relief by the 10th anniversary of the financial crash, should be at the forefront of our minds. True dignity at work begins with a fair workplace environment, where employees have a meaningful stake in the companies they work for and where all share an interest in eliminating overwork and underpayment. To do this we need a new social contract to address low pay and poor working conditions.

Defenders of the gig economy will point to how new freedoms and flexibilities in the labour market enable many more people to fit work around the circumstances of their lives, and that is obviously good in this form of self-employment for some people in the workforce. At the same time, we risk normalising a level of insecurity in our workplace unseen since the 1930s. It will therefore not surprise noble Lords that I support the IPPR commission report’s proposals to have more workers on boards. Surely, all the evidence points to the fact that allowing employees a part to play in corporate governance can be a very positive step. I support moves towards increased transparency, towards greater gender balance and increased employee shareholding, especially if it is designed so that people are holding their shares for a significant period, for long-term investment in the company in which they work.

Giving employees an opportunity to see the fruits of their labour, in the form of shares, must surely be considered as soon as possible by this Government. While neither employee shareholding nor workers on boards are silver bullets, they are, I believe, steps in the right direction. However, without a new social contract they are unlikely to deliver the change we so urgently need.

Working-age Benefits

Lord Bishop of St Albans Excerpts

Thursday 16th November 2017 Lords Chamber

Asked by

[The Lord Bishop of St Albans]

To ask Her Majesty’s Government what is their assessment of the impact of rising inflation on families affected by the freeze of working age benefits.

[The Lord Bishop of St Albans]

My Lords, we are at risk of failing a substantial number of children and some of the most needy people of this country. If a society is to be judged by how it treats its most vulnerable, unless we are prepared to put aside party differences and make common purpose in addressing inequalities in our system of social security we will surely be found wanting. So what are the principles we should use when assessing the design and implementation of benefits policy, particularly the freeze on working-age benefits? We on these Benches are not ignorant of the Government’s substantial financial challenge. An ageing population, a sizeable deficit, and the need for additional expenditure on the NHS and on our education system put limits on the Chancellor’s options.

Understanding these challenges, the Church of England’s General Synod in a debate in 2009 asked that policies intended to reduce the deficit be judged against three principles: fairness, generosity and sustainability. The first of those principles, fairness, I know is important to many Members of this House, although we might have different ideas about what fairness is. Nevertheless, a fair benefits system needs to be transparent and consistent. On this point, I simply note that treating those in receipt of benefits fairly will require recognition of their individual dignity and sensitivity to individual circumstances.

Secondly, the notion of generosity in welfare provision is contentious. As I said in a debate earlier this week, this point is illustrated in the Bible where the community is called to ensure the welfare of the widow, the orphan and the stranger, although, as St Paul so succinctly put it, a person who is not prepared to work should not expect to eat. It was Archbishop William Temple who popularised the phrase “the welfare state”, and it is right to want fellow citizens to thrive and flourish. As such, the welfare system should be an instrument that facilitates mutual responsibility, especially for those who for reasons beyond their control do not have enough to survive on. To that end, profitable companies and the wealthiest members of society should seek to fulfil rather than avoid tax obligations, even if their activity meets the letter of the law. After all, the reason why so many international companies do so well here in the UK is that they benefit from an educated, healthy workforce and a world-class social infrastructure. In return, they need to make a fair contribution towards the funding of these things.

Thirdly, the welfare state should be sustainable. Incentivised reliance on the welfare system inhibits individuals’ ability to flourish, yet a society that allows large numbers of its citizens to live in poverty risks social disorder and disintegration.

All this brings me on to the current welfare system. The four-year freeze in most working-age benefits was announced by the then Chancellor in the 2015 Budget to last from 2016-17 to 2019-20. The stated intention of the policy at the time was to correct perceived policy issues: first, an alleged unfairness that benefits were rising at a faster rate than wages and, secondly, to make sure that people were better off in work than out of it. Despite this, in part owing to stagnating wages and rising prices, we find that benefit cuts are making families, even those in work, worse off. According to the IFS, absolute child poverty is projected to rise by four percentage points between 2015-16 and 2021-22 and relative poverty by around seven percentage points, primarily due to the impact of the continued freeze of benefits. A rise in absolute child poverty in this country is unprecedented, and I must say that it is unacceptable. That the burden of the freeze weighs disproportionately on children is revealed when it is estimated that in the same timeframe pensioners will see a 2% decrease in absolute poverty and their relative poverty will remain unchanged. This is fundamentally an unfair burden for children to bear.

At the same time, the impact of the freeze is intensified by rising inflation. Yesterday the ONS announced the most recent inflation statistics, reporting that food and non-alcoholic drink prices last month were 4% higher than in October last year. That is the fastest rate of growth since September 2013. Gas and electricity prices are also up by 6%, hitting the poorest families hardest. The cost of essentials has been rising faster than inflation since 2006. While benefits and tax credits will have risen by only 3% over the seven-year period between 2012 and 2019, prices are expected to rise by at least 13% on average over the same period. Families relying on benefits to supplement their income are simply unable to keep up with the rising cost of living.

The effects of this policy are felt intensely by the families affected. Its impact is huge, equivalent to taking £7 billion every year from family budgets, yet this is easily overlooked because its effect is incremental and works not by reducing the amount of benefits or tax credits that people receive but by reducing what they can buy. Families may be receiving all the benefits they are normally entitled to but are able to stretch them less and less far. Moreover, the majority of affected families are working families, which undermines the Government’s objective of making work pay. The National Audit Office reported in September this year that the freeze in local housing allowance rates has contributed to private rental properties becoming less and less affordable for families, which in turn is likely to be contributing to rising homelessness. Shelter estimates that the freeze on local housing allowance puts more than 1 million households at risk of homelessness by 2020. Since 2006, the maximum award for childcare costs that can be claimed under tax credits has been fixed. This effectively amounts to a decade-long freeze in the refundable element of childcare costs for low-income families. As the cost of essentials rises and families have less money for childcare and housing, the benefits freeze actually serves as a barrier to work rather than enabling it. The status quo is unsustainable.

There is room for reassessment. The benefits freeze will actually save considerably more than originally anticipated due to rising inflation. Ending the freeze a year early or uprating benefits by 1% a year for the next two years could still achieve the same overall savings originally planned. I hope that all parties will commit to making this change. Raising the personal tax allowance is not an effective solution because most of the benefits go to better-off households. Only £1 in every £6 spent on raising the personal tax allowance will go to households in the bottom half of the income distribution, with a negligible impact on poverty.

On Tuesday, the Governor of the Bank of England, Mark Carney, warned that the lack of a Brexit deal could see inflation rise further, putting even greater pressure on poorer people. A fundamental reconsideration of the benefits freeze, in light of the principles that should guide welfare policy, is urgently needed. I hope that the Minister will not only assure the House that Her Majesty’s Government are listening but will respond by committing Her Majesty’s Government to reconsider the freeze, which is already causing so much misery.