Equality Act 2010 (Work on Ships and Hovercraft) Regulations 2011

Lord Lester of Herne Hill Excerpts

Monday 27th June 2011 Grand Committee

[Lord Higgins]

My Lords, it is a very long time indeed since I qualified as a member of the Institute of Chartered Shipbrokers. Since then, I have taken a strong interest in the industry, both as a Minister and Opposition spokesman on trade, in Select Committees and so on. This is an extremely important order. The Minister has set out clearly why it is before us: as a result of European legislation. However, I have always considered it important that the number of ships on the British register should be as large as possible. It has considerable advantages to the UK, not least because, generally speaking, if ships are registered here, the headquarters, operating offices and so on tend also to be in the UK; the Treasury, in particular, benefits as far as taxation and other things are concerned. In addition, it encourages other, related, industries such as insurance, which have traditionally been located in London.

That is very important, but there are other aspects such as the training of officers, which again builds up the link with the UK. We remain a major maritime nation. None the less, the size of the register has, for reasons such as taxation, varied over the years. However, we have always played an important role in the IMO and so on.

This proposal, the extremely helpful Explanatory Memorandum and the impact assessment really examine two possibilities. They rightly reject the idea that we could do nothing, because, as the Minister has pointed out, we are under considerable duress from the European Union to deal with the matter. So the alternatives are either to change the position on differential pay for employees from the European Union, the EEA and the designated states—the designated states are of course really quite expensive in this context—or simply to say that you cannot differentiate at all, regardless of where the employees come from. The Government have opted for the first of these options and, I believe, rightly so. I have received some assessments from the Chamber of Shipping, and the impact assessment also deals with these matters as far as both options are concerned. They say that if one were to do it for seafarers from the EEA and designated states, the average percentage increase in wage costs, which range between 6 per cent and 32 per cent, would impact on a ship’s overall running costs by up to 7.2 per cent. On the other hand, if one were to take the widespread option, the range would be an increase of 10 per cent to 130 per cent; it would depend, of course, on the type of ship and so on. The increase in the overall cost could be as high as 56 per cent.

The industry is highly competitive. If we are compelled to pay higher rates, as would be the case in the international market generally, that would obviously have a serious effect on our position and be likely to result in a considerable reduction in overseas earnings. While it appears that there is no choice but to go for the European option rather than the global one, that would seem to be the right solution. I hope that the Minister will give us an assurance that he is certainly not proposing to consider any further a wider option, which would have a very serious economic effect at a time when the British economy is obviously under considerable strain.

There is a provision in the order for a review after five years. I hope that the Minister will say that if it turns out to be the case that the percentage increase in wage costs that I have indicated under the provisions of the order is having a more serious effect than the one that we anticipate at the moment—which is already serious—a review might be carried out earlier to see whether, in the light of experience, some change ought to be made in the order. However, overall, this is probably the best compromise that can be effected. None the less, it will have an adverse effect on the British economy.

[Lord Lester of Herne Hill]

My Lords, 50 years ago in Worthing I had the privilege of arguing with the noble Lord, Lord Higgins, when I stood against him for the Labour Party and he won resoundingly. I disagreed with him then and, 50 years later, I disagree with what he has just said. I hope that in the long run the outcome might be different from what he hopes. The regulations are welcome—

[Lord Higgins]

The noble Lord should not worry unduly: my majority was only 32,000.

[Lord Lester of Herne Hill]

Yes, it was so great that the votes could have been weighed rather than counted. However, I got the highest vote Labour ever got in Worthing—which was still quite low.

The regulations are welcome in so far as they apply the provisions of the Equality Act 2010 to employment on ships and hovercraft so as to forbid discrimination, harassment, victimisation and other unlawful conduct in relation to the protected characteristics of age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, and sex and sexual orientation. They are welcome also because they bring the law into line with our EU obligations so as to avoid liability in the pending Commission infringement proceedings. Because of the technical nature of some of the issues and their public importance, I gave the Minister notice of what I will say so that he might be well advised in his response. I hope that what I wrote to the noble Lord, Lord McNally, was passed on to my noble friend who is handling the matter.

It is most regrettable that these regulations are designed to permit some forms of racial discrimination by the British shipping industry to be outside the protection of the Equality Act, where the discriminatory treatment involves paying seafarers less because of their nationality in a way that may amount to direct or indirect race discrimination on grounds of ethnicity or national origin. I pause to mention that the designated states do not include those of Commonwealth Asia: namely, India, Pakistan, Bangladesh and the Philippines.

It is worth recalling the history. Under the Merchant Shipping Act 1894,

“the master or owner of any ship, or his agent, may enter into an agreement with a lascar, or any native of India, binding him to proceed either as a seaman or as a passenger … to any port in the United Kingdom, and there to enter into a further agreement to serve as a seaman in any ship which may happen to be there, and to be bound to any port in British India”.

If the lascar refused to enter into the second agreement, under which he was employed on blatantly discriminatory terms, he should,

“be liable to the same consequences, and be dealt with in all respects in the same manner, as if he had voluntarily entered into the same”.

In other words, he could be punished under the criminal provisions of the Act for desertion or indiscipline.

Much of the 1894 act was repealed by the Merchant Shipping Act 1970, which did not re-enact the unsightly lascar clauses. However, under the Race Relations Act 1968, the practice of making racially discriminatory agreements with non-white seamen brought to Britain for this purpose was given fresh statutory blessing. During the passage in 1968 of the Race Relations Bill—I was watching at the time—Ben Whittaker MP attempted in Committee to remove provisions that permitted race discrimination on board merchant ships. He was supported by Eric Heffer MP, who pointed out that if the exemptions were not removed, 35,000 Asian seamen would be outside the Bill's protection. But the Home Secretary, James Callaghan, recalled his personal experience as a Cardiff MP and said that there was a long tradition in the United Kingdom that seamen of mixed races were segregated according to race and that lascars continued to be employed on British ships on terms and conditions of service which were dissimilar to those pertaining to British crews. Mr Callaghan, as he then was, said that he wanted to see this discrimination ended, but he would not make an amendment, which no doubt would have been a great advance in race relations, but would have upset a great many other things.

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[Lord Higgins]

I am trying to follow my noble and learned friend, and it may well be that I have misunderstood the situation. Incidentally, he refers to the shipbuilding industry, when it is the ship operating industry. However, as I understand it, although I may be quite wrong, the order is purely concerned with pay differentials; all the legislation with regard to discrimination in other areas and so on is not effective. No doubt the Minister can clarify whether that is the case. In all events, if, as a result of the change on the pay differential, the vessel is flagged out to, say, Liberia, any protection they may have from UK law is lost.

[Lord Lester of Herne Hill]

First, I apologise for saying “shipbuilding industry”, which is of course not what was intended at all; one is concerned with the shipping industry. Secondly, my noble friend is perfectly right that we are concerned with racial discrimination in pay and nothing else, which is preserved by these regulations. It is that and nothing else which Susan Carter of the external panel was considering in her careful review of stakeholder evidence on differential pay in the shipping industry, where she goes through the consequences of outlawing differential pay on five types of ship based on a Chamber of Shipping survey of its members. She looks at 229 ships and estimates what may happen about change of flag and so on. I have been quoting from her report. I submit that, being an external reviewer who has looked at all the evidence, her report should be given careful consideration. I respectfully agree with the report and wish that the Department for Transport would follow the wise and objective advice of the external panel instead of creating considerable legal uncertainty and continuing unfairness which our courts and employment tribunals may have to resolve. That may be to the benefit of my profession, but it is not in the public interest. I wish that the Government had taken the advice of their own external reviewer and I hope that these points can be considered before we come to the debate to approve the regulations.

[Lord Tunnicliffe]

My Lords, I thank the Minister for his explanation of these regulations and other noble Lords for their thoughts. The point of the noble Lord, Lord Lester, is well made. The regulations will leave an unsatisfactory piece of law on our statute book. They will regularise discrimination by nationality on British vessels. There are no two ways about that: they are designed to do so. They are designed to be compatible with European law and, for appropriate individuals, with UK law, and are designed to except those who are not in the protected group: some 12,700 overseas seamen.

Option 2 in the impact assessment simply says that it is option 1, but also makes it unlawful for employers to pay seafarers differential rates of pay on the basis of their nationality. The argument against it is made by the Chamber of Shipping, and it is the argument that the Government seem to have accepted. It goes something like this: if we make discrimination illegal, our costs will go up, so we will deflag and that will be bad for the economy.

We are not going to oppose the regulations because we think it is better to get the first bit right, which is the option in front of us, and perhaps debate later the second bit, which is whether all seamen should be involved. But I am concerned that the report by Susan Carter, from which we have had extensive quotes from the noble Lord, Lord Lester, seems to have been ignored in the regulations, the memorandum and the impact statement. She makes a basic statement:

“On the basis of the evidence submitted, I recommend outlawing the practice of nationality-based pay differentials for seafarers altogether”.

So I hope that the noble Earl will respond to the noble Lord, Lord Lester, and myself on why this report was ignored before this goes in front of the House.

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[Earl Attlee]

My Lords, this has been an interesting and, as usual when the noble Lord, Lord Lester of Herne Hill, is involved, well informed debate. I thank all noble Lords for their contributions. Gathered here today is a wealth of transport and equal rights experience, and I am grateful for the points made by the noble Lord, Lord Tunnicliffe, that we should solve the immediate problem first of all and then consider the wider issues.

On 2 March 2010, in a debate during the Report stage of the Equality Bill, the noble Lord, Lord Rosser, made an impassioned plea on behalf of seafarers in respect of both differential pay and the UK national minimum wage. Unfortunately, the noble Lord cannot attend the Committee today due to duties in the Chamber.

In response to that earlier debate, the then government Minister, the noble Baroness, Lady Thornton, said:

“The Government must carefully consider the implications of ending the practice of differential pay”.—[Official Report, 2/3/10; col. 1384.]

This Government have carefully considered the issue and I pay tribute to my colleague in another place, the Maritime Minister. Since taking office, he has demonstrated a hitherto unseen level of determination to address the issue. He has consulted extensively with the shipping industry and with the unions.

As I said in my opening remarks, the Government accept that the regulations on differential pay do not go far enough for some, while for others they go too far. The noble Lord, Lord Lester of Herne Hill, is clearly embedded in the first camp. However, the Government are determined to protect the future of the UK shipping industry and with it the Red Ensign. The regulations that we are considering do the least possible to avoid a substantial fine being imposed by the European court.

The UK national minimum wage for seafarers is also a highly complex area and the Government are very familiar with the concerns expressed by the maritime trade unions. A legal working group that includes these unions was set up to look into how far international and EU law would allow the Government to apply the UK national minimum wage to non-UK ships. The conclusions of the working group will be submitted to Ministers in due course, after which all interested government departments, including the Department for Business, Innovation and Skills, which is responsible for the national minimum wage policy, will give further consideration to the issue.

I am grateful to the noble Lord, Lord Lester of Herne Hill, for giving me advance notice of what he intended to say. I, too, picked up the “shipbuilding” typo but rapidly translated it into “ship owners”. In reply to the noble Lord, and with all due respect, indirect discrimination is not the issue here. The regulations allow discrimination on grounds of nationality. That is direct discrimination, excused by paragraph 1 of Schedule 23, “General Exceptions”, and by Section 81, which says that Part 5 of the Act applies to seafarers only in such circumstances as are prescribed. These regulations prescribe the circumstances.

I confirm that it will continue to be lawful to pay some seafarers differently because of their nationality if they were recruited outside Great Britain and are not British citizens or nationals of another EEA state or designated state. That will include Filipino seafarers.

[Lord Lester of Herne Hill]

I fear that I have not explained my point clearly. Something may be discrimination on grounds of nationality and also direct or indirect race discrimination. It may involve discrimination based on nationality and ethnicity or on national origins, for example—that would be direct discrimination—or it may be indirect discrimination based on nationality, national origins and ethnicity. I will not go through the definitions in the Equality Act to explain what I have just said, but the definition is very large and the case law makes what I have just said crystal clear, whether it applies to “no turbans”, “no Irish” or discrimination using other foreign epithets. It is quite clear from court rulings that discrimination may be ostensibly on one ground but in fact is on others. I do not want to see litigation on this matter because we have not dealt properly with it.

[Earl Attlee]

My Lords, I fully understand my noble friend's desire to avoid litigation. These extremely complex issues are well beyond my understanding, but I will give the noble Lord a detailed response in writing. My noble friend’s argument is an essentially legal one and I hope that the Committee will forgive me if I write to him.

There remains the question of whether it is immoral to allow differential pay in any circumstances. That is a rather simpler question to answer. The short answer is no. The world is not that simple. That is why, traditionally, seafarers from around the globe have tended to be paid amounts commensurate with the domestic job market in their own countries. If seafarers from countries with generally low-paid workforces were paid at higher rates, this could seriously distort the job market in their own country. Imagine, for example, a situation in which highly skilled surgeons or other professionals find themselves better off serving as ratings on ships than using all their training, skills and knowledge to help to cure people and solve their problems. This would be damaging at a far deeper level, and I suspect that there could be other serious unintended consequences.

My noble friend Lord Lester asked me why the protected characteristic and civil partnership were excluded.

[Lord Lester of Herne Hill]

I am sorry; I have not asked that. Although I put it in my draft, I am satisfied with what the Minister said on that.

[Earl Attlee]

I am obliged to the noble Lord.

The aim is to apply the regulations to as many ships as possible of whatever flag, in so far as this is consistent with international law, to limit the effects being felt by the UK flag alone. The extension of the application of Part 5 to EEA ships is therefore limited to those protected characteristics which are underpinned by EU law. A ship flagged to EEA states would be under the same obligations. The characteristic of marriage and civil partnership is not an EU obligation and so is excluded.

My noble friend Lord Higgins made several important points. I accept his points about the importance of the UK register, and I hope that that came out in my comments. On the effect on the UK flag, leaving aside the issue of differential pay for the moment, the effect of applying the new consolidated equality legislation to work on ships is not very burdensome. Indeed, it should bring benefits through greater clarity for employers and employees.

As to the effect caused by the need to change the law in respect of seafarers’ pay, we cannot say with absolute certainty what the effect will be on the UK-flagged fleet, although many noble Lords have suggested what it could be. We have consulted closely with all sides of the shipping industry on the likely effect and will monitor it closely. We are regulating in a way that will be least disruptive to the industry while allowing it to comply with EU law. We are also seeking undertakings from the European Commission that it will be vigilant in ensuring that other EU member states are also following EU law.

My noble friend Lord Higgins asked me about the review provided for in the regulations, and asked whether we would review earlier. As I indicated in my opening remarks, we will keep the implementation and the situation under close observation.

My noble friend Lord Moynihan asked me why the regulations did not appear to apply to Northern Ireland. Northern Ireland has been asked to introduce its own parallel legislation at the earliest opportunity. Until that legislation is also approved, the UK will remain in breach of EU law. The European Commission has been informed that action in Northern Ireland was necessarily delayed due to recent elections, but that the matter is in hand. My noble friend also asked me a rather detailed question about the definition of “sufficiently close link”. It is a basket of measures as set out in Regulation 2(2)(b). It will be determined by reference to all relevant factors including those set out in the regulations.

Noble Lords asked me particularly about the Carter report. I agree that it is a significant report. Susan Carter reviewed all of the evidence submitted by stakeholders and came to the conclusion that she did. She was not asked to consider any other evidence, such as that from government. Maybe Susan Carter’s report was a comment on the industry’s evidence to maintain the status quo. As I have already indicated, my honourable friend Mr Penning, the Shipping Minister, has consulted extensively.

I am grateful to all noble Lords for their contributions. The wider issues are indeed complex. As indicated, I will write to all noble Lords who have contributed to the debate.

[Lord Tunnicliffe]

Will the noble Earl write specifically on the consideration that the department has given to Susan Carter’s report and say why it does not share her conclusion? He seems to give a partial explanation which I do not think is valid. Susan Carter consulted as widely for her report as the department has for the regulations.

[Lord Lester of Herne Hill]

While the noble Earl is dealing with that, I should add that Ms Carter states at the beginning of her report:

“This report reviews evidence submitted by key stakeholders in the shipping industry about differential pay for seafarers on grounds of nationality. The Department for Transport invited them to submit financial estimates of the likely impact of either: option A … or option B”.

That the department did not give evidence is, with respect, not the point; the point is that the department asked her to do this job on the basis of evidence submitted by—that ghastly phrase—“key stakeholders”. Therefore, I am mystified as to how anyone reading her report could fault her findings or her conclusion. I would be very grateful if the Minister would write to us about that as well.

[Earl Attlee]

My Lords, paragraph 8.4 of the Explanatory Memorandum states that a summary of the evidence submitted can be found on a website. I will not read out the website address, but when I write to noble Lords I will discuss the Carter report. As indicated, I will write to all Members of the Committee before seeking the House’s approval of the affirmative instrument.