Ethnicity Pay Gap Reporting

Lord Sikka Excerpts

Monday 25th October 2021 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank my noble friend Lord Boateng for this much-needed debate and fully support his call for mandatory reporting.

The ethnicity pay gap reflects sedimented residues of colonialism and worker exploitation and must be eradicated. Disclosures are vital in giving visibility to unacceptable practices and paving the way for reforms. Well-managed businesses already have the relevant information, so the cost of disclosure is negligible. In any case, it would be a minuscule proportion of the amounts that these entities spend on public relations campaigns.

Mandatory reporting of the ethnicity pay gap and investigation of the related lack of diversity should be extended to professions, universities and other large entities. Only 140 of the UK’s 21,000 university professors are black. Only six of 800 partners at UK Magic Circle law firms are black. As has already been said, FTSE 100 companies have zero senior black executives at board level.

In 1987, the accountancy profession was the subject of a Commission for Racial Equality probe into racism in the recruitment process. It published a document entitled Chartered Accountancy Training Contracts: Report of a Formal Investigation into Ethnic Minority Recruitment. It promised to revisit the issue, but never did. Its successor bodies have not done so either.

While some accountancy firms have voluntarily disclosed ethnicity pay gap data, progress towards eradication of the ethnicity pay gap is slow. Most recently, black staff at PricewaterhouseCoopers are reported to be paid 41% less than white colleagues. Ernst & Young has an ethnicity pay gap of 36.7%.

There is a lack of diversity in big accounting firms. Last year, there were only 17 black partners among the top eight accountancy firms. Only 11 of the Big Four accounting firms’ 3,000 UK partners are black. Deloitte has one black partner, Ernst & Young and KPMG have two each and PricewaterhouseCoopers has only six. A July 2021 report by the Financial Reporting Council showed that disabled and LGBTQ+ citizens have virtually no chance of reaching a senior position in major accounting firms.

Will the Minister bring legislation to achieve the following six objectives: mandatory ethnicity pay gap reporting; directors providing binding plans to reduce the ethnicity pay gap and increase diversity; increased diversity and reduction of the ethnicity pay gap forming part of executive remuneration contracts; auditing of this data by trade unions and works councils, not accounting firms that cannot be trusted to deliver any honest audit; sanctions from the Government, including refusing to give public contracts to entities which are not reducing their ethnicity pay gap; and an annual report from the Government explaining how their policies are addressing ethnicity pay gap issues? I look forward to hearing the Minister’s detailed reply to these six suggestions.