Government Plan for Net Zero Emissions

Louise Haigh Excerpts

Tuesday 8th October 2019 Westminster Hall

[Sarah Newton]

I am glad that the hon. Lady has mentioned the target. The groundbreaking Climate Change Act 2008, which is unique to our country in having all-party support, set up the independent Committee on Climate Change. All Governments depend on evidence and the best science to show what we can do. The independent Committee on Climate Change says that the 2050 target is the right target: it is ambitious but feasible, whereas the 2030 target is not necessary and not deliverable. We risk undermining the very independence of the Committee on Climate Change and the evidence-based policy-making approach that we must take if we start to pluck numbers out of thin air for political gain.

[Louise Haigh (Sheffield, Heeley) (Lab)]

The hon. Lady makes some powerful points. Listening to experts is crucial, so I hope she shares my concern—I hope the Minister is listening—about the Government’s decision to overturn the advice of their own Planning Inspectorate, given on climate change grounds, regarding the new Drax gas-powered turbines at Selby. They would undermine the target that she is pushing.

Climate Action and Extinction Rebellion

Louise Haigh Excerpts

Tuesday 23rd April 2019 Commons Chamber

[Claire Perry]

We are already incentivising renewables. We have always said—I believe that this is right—that we must be technologically neutral in such things. All technologies started out from pretty much the same place, but some have progressed faster than others. We must also have cost-effectiveness, so we cannot spend other people’s money on supporting technologies that will remain expensive over the long term—[Interruption.] The hon. Lady is waving her hands, but is it not incredible that the price of offshore wind has dropped over the past two years by a proportion befitting a technology company, let alone a mechanical engineering company, because of the policy and auction structure and the market investment that we have brought forward? We should be celebrating that and the fact that the North sea is the best place in the world for offshore wind.

[Louise Haigh (Sheffield, Heeley) (Lab)]

Global Witness published a report this morning that found that $4.9 trillion is invested in oilfields and gasfields that are either in development or not yet in production and will therefore contribute to exceeding a global warming scenario of 1.5°, as per the terms of the Paris accord. Much of that investment comes from FTSE 100-registered companies. What legal advice will the Government be giving to London headquartered businesses that are investing in breach of our international obligations?

[Claire Perry]

I am sure the hon. Lady has also read “The Burning Question”, which was published in 2013 and addresses the challenge of the valuation of oil and gas reserves. Indeed, I have already answered a question on this subject. There is a challenge on how quickly the oil and gas companies are transitioning but, as we were discussing earlier, many people in the UK, including the Exchequer, rely on this industry, which has allowed us to cross-subsidise much of the renewables success we have delivered. She also knows that these companies are global organisations, and we need to work globally to ensure we solve the problem.

Leaving the EU: Protection for Workers

Louise Haigh Excerpts

Wednesday 6th March 2019 Commons Chamber

[Greg Clark]

I will not do that, because one of the conclusions of the Matthew Taylor report was that most people, of the small—and, indeed, shrinking—number of people on zero-hours contracts welcome that flexibility. The hon. Gentleman will know that many Labour councils up and down the country have casual workers on those contracts and say, in terms, that they are an important part of what their workers want.

However, I do agree with the hon. Gentleman on enforcement. A number of firms are doing such things, but they are not typical, by any means. Some of us will have read about some of the abuses in the garment industry in and around Leicester, for example. These simply cannot be allowed to continue without the steps being taken to restore confidence to those workers that their rights will be respected. That is the intention behind what I have set out in terms of strengthening and better resourcing our enforcement mechanisms.

[Louise Haigh (Sheffield, Heeley) (Lab)]

Fresh in the minds of those of us who feel scepticism about the commitments made by the Secretary of State and the Prime Minister will be the fact that his party, in coalition with the Liberal Democrats, introduced employment tribunal fees, which were ruled unlawful by the Supreme Court, largely because of their hugely disproportionate impact on women bringing cases on maternity discrimination. Can the Secretary of State confirm that, contrary to comments made by the permanent secretary at the Ministry of Justice, his Government have absolutely no plans to reintroduce employment tribunal fees?

[Greg Clark]

The hon. Lady is a little churlish in ignoring some other examples. I would have thought she would welcome, for example, the introduction by a Conservative-led Government of the national living wage, which has made a big difference to many low-paid people across the country. Clearly, the judgment that was made by the Court struck down those fees. We will respect the judgment of the Court in the proposals that we make as we respond to it.

Oral Answers to Questions

Louise Haigh Excerpts

Tuesday 12th February 2019 Commons Chamber

[Kelly Tolhurst]

I would love to come to Penzance if time permits—it is an area of the country I would love to visit—and I will continue to work with my hon. Friend to deliver post office services in his region. He is a passionate supporter of the Post Office and I welcome his support for me in my role as the Minister in that area.

[Louise Haigh (Sheffield, Heeley) (Lab)]

T6. It was concerning to hear the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Rochester and Strood (Kelly Tolhurst), join the International Trade Secretary just now in failing to rule out zero tariffs in the event of a no deal. Does the Secretary of State not agree that such a move would leave us open to a flood of cheap imports, drive down wages and cost jobs?

[Greg Clark]

Of course we need to consult—and we are consulting—with businesses and sector organisations to ensure that the right decision is made, but no decision has yet been taken.

Young Carers Support

Louise Haigh Excerpts

Tuesday 12th February 2019 Westminster Hall

[Louise Haigh (Sheffield, Heeley) (Lab)]

It is, as always, a pleasure to serve under your chairmanship, Mr Owen. I congratulate my hon. Friend the Member for Sheffield Central (Paul Blomfield) wholeheartedly on securing the debate. He does an enormous amount of work in championing young carers from Sheffield and across the country. Like him, I have met many of the young carers that he mentioned, in part because of the fantastic work of Sheffield Young Carers, which is such an effective voice for those young people, but also because the young people themselves are such excellent advocates, who need absolutely no prompting in describing their experiences and making an impassioned case for change to support the needs of this hidden army of young people, who contribute so much yet receive so little.

I employ a young carer in my constituency office. Gabby has cared for her family since she was four years old and still cares for them now. As a result of that experience, she is an absolutely amazing young woman, who I believe is genuinely capable of anything, but who just needed a chance and some recognition of the obstacles that she faced while growing up that other young people did not have to. That is really at the heart of what young carers are asking for—recognition. I am talking about recognition of the incredible work that they do day in, day out; recognition that as a result of caring for siblings or parents, they struggle to get to school right on time, and that when they are at school, they are really tired; recognition that as a result of their caring, they are much more likely to have mental health problems of their own and risk burnout. Some services do recognise that, but nowhere is the recognition more important than in schools, and I am sorry to say that young carers’ experience in schools is patchy at best. In the words of Sheffield Young Carers, some schools help young carers, but some still do not at all.

It is incumbent on Government to ensure that schools treat young carers consistently and with the respect and recognition that they deserve, so I should be grateful if the Minister would respond explicitly to the recommendations made on education by my hon. Friend the Member for Sheffield Central—that schools should be required to have a young carers lead that Ofsted’s inspection framework should cover support for young carers, and that the teacher training curriculum should include information about identifying and supporting young carers.

As my hon. Friend mentioned, I have been working with a lot of young carers over the past year to campaign for free travel for young carers in Sheffield, both while they are in school and outside term time. Understandably, young carers travel much more than their counterparts, going to and from health appointments, collecting shopping and perhaps visiting those they care for. It is absolute common sense that we should recognise that by providing them with free travel.

Just last week, the young carers presented our petition to Sheffield City Council, where they received a standing ovation. Last summer, South Yorkshire passenger transport executive conducted a pilot, but we now need to see it rolled out. If the Minister could commit to raising that with his counterparts in the Department for Transport, we would appreciate it.

These young people ask so little of us, but give so selflessly to their loved ones and save the Exchequer and society so much. It is the very least we can do to make their voices heard in this place and to ensure that sufficient support is in place in their communities.

[Albert Owen (in the Chair)]

I am grateful to the hon. Lady.

Oral Answers to Questions

Louise Haigh Excerpts

Tuesday 16th October 2018 Commons Chamber

[The Minister for Energy and Clean Growth (Claire Perry)]

My hon. Friend has made a valuable point. We have high sustainability criteria, but we must ensure that biofuels are sourced sustainably. We have asked the Climate Change Committee for a bioenergy report, which it will provide shortly, and which will give us new advice on questions of land use and the long-term best use of resources.

[Louise Haigh (Sheffield, Heeley) (Lab)]

T2. Rather than listening to communities where shale gas applications have been made, the Government have continued to dismantle the hurdles over which fracking companies should be forced to jump. Will the Minister confirm that she is now genuinely considering weakening the controls on earthquakes in relation to fracking companies?

[Claire Perry]

I can absolutely confirm that I am not considering weakening the monitoring controls on seismicity.

Carillion: TUPE

Louise Haigh Excerpts

Wednesday 21st February 2018 Westminster Hall

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Ms McDonagh, it is traditional at the start of these debates to say what a pleasure it is to serve under the Chair, and today it is really true. I begin by congratulating my parliamentary neighbour, my hon. Friend the Member for Wolverhampton South West (Eleanor Smith), on securing the debate and by thanking the Minister for his close engagement in this issue in recent weeks, since the company went into liquidation.

As the hon. Member for Stirling (Stephen Kerr) just said, many aspects of Carillion’s collapse are the subject of the inquiries by the Work and Pensions Committee and the Business, Energy and Industrial Strategy Committee, including how the company got itself into such financial trouble, why so many big contracts went wrong at the same time and why the company kept paying out dividends while the pension deficit built up, among many other questions. Today, we focus on one in particular: Carillion and its staff.

At the time of Carillion’s collapse, the company employed roughly 20,000 people in the United Kingdom and a similar number abroad, with 450 employed in its Wolverhampton headquarters. Since then, more than 1,000 of those workers have lost their jobs. Many of them would have had access to the various voluntary redundancy schemes that the company put forward in the 18 months or so running up to its collapse.

That raises a moral dilemma. Workers who had 20 or 30 years of service would have got quite generous voluntary redundancy payments had they pursued that option in the run-up to the company’s collapse. Therefore, the first question is: what was the gap in knowledge between the workers who were simply doing their jobs—perhaps thinking that there might be another couple of rounds of voluntary redundancy, so there was no urgency —and those at the top of the company, desperate to keep the company afloat? What did those at the top know about the prospects for the company’s collapse, compared with the workers, who perhaps did not? That gap in knowledge could result in a loss of tens of thousands of pounds—the difference between what someone would have got under voluntary redundancy and the bare statutory minimum they are now entitled to if they lose their job.

[Louise Haigh (Sheffield, Heeley) (Lab)]

My right hon. Friend is making a really important point. A constituent of mine came to see me about the lack of information from Carillion and, frankly, the downright lies they have been told by their management and leadership. They were told that they would be made redundant on 31 January, and the goalposts have been moved time and again.

Now, staff in Sheffield are being made redundant on a rolling basis—they do not know when it will happen. Staff who have been there for 20 or 30 years, as my right hon. Friend said, run the risk of losing out on significant redundancy payments or are choosing to leave the company and find extra work. I hope the Minister will respond on information and transparency in the company.

[Mr McFadden]

My hon. Friend makes a good point. The first thing I will raise is the question of redundancy and the payments available to those 1,000 or so people who have lost their jobs, but the second issue is about the workers who are left.

Carillion was, of course, a complex web of contracts, covering sectors as diverse as the Ministry of Defence, construction, prisons, school maintenance, cleaning and a whole number of other things. The official receiver is now going through those contracts and looking for alternative suppliers to take them over. The central question before us in this debate is on what terms those will be taken over, and what the pay levels and conditions will be for the workers who find themselves transferred.

Hydraulic Fracturing: North East Derbyshire

Louise Haigh Excerpts

Wednesday 22nd November 2017 Westminster Hall

[Lee Rowley]

My hon. Friend highlights a point that I will come to in a moment: we have a variety of potential opportunities here, including some we have not necessarily thought about previously, such as tidal lagoons.

Proponents of fracking would argue that the United Kingdom, blessed by large-scale energy resources, should take the opportunities to harvest the energy beneath its sea and soil, to improve our energy security and ensure we are diversifying our energy mix. “Rejoice!” they will say, “The United Kingdom has a long and rich history of mining in this part of the world and across the United Kingdom as a whole, and fracking is just another innovation in a long seam of innovation that helps to heat our homes and allow us to drive our cars.”

The alternative argument is equally clear and concise, if not more so. “Fracking,” say its opponents, “is an energy activity which we do not need and should not support.” For some, that is down to environmental concerns. The continuation of hydrocarbon development in our country is not something we should support, in understanding the challenges we have in the coming decades. For others, such as me, it is the sheer imposition and impact of this kind of activity on areas that have been rural for hundreds of years and never seen anything like the kind of development that is proposed if fracking happens.

[Louise Haigh (Sheffield, Heeley) (Lab)]

Does the hon. Gentleman agree that the problem with the application in his constituency is not just the impact it will have there, but that it could be the tip of the iceberg for applications in surrounding constituencies, such as my own, that are in urban areas? This is not just an issue for rural areas. All the surrounding areas are considered to be high risk by the Coal Authority.

[Lee Rowley]

The hon. Lady brings up an important point—one that I will come to later in my speech, because it is vital to understand that specific point before we conclude.

Some will argue from an environmental perspective, some from a perspective on the sheer imposition of activity, and others will be concerned about the uncertainty that fracking brings, for a multitude of reasons, which I cannot hope to go into in this short debate. Others would simply point to the Department for Business, Energy and Industrial Strategy opinion tracker on fracking, which shows that only 16% of people were in favour of fracking in the latest survey in August this year.

I acknowledge that the Government take a different view from me and many of my residents. I accept the place the Government start from—I have no criticism of that—which is that we need to improve our energy security, diversify our energy mix and ensure we can bridge to the future when renewables can take on a greater share of the energy generation that we need in this country, but I do not agree with the Government’s conclusion on this particular issue.

I accept that energy production has fallen by over a half since 2000, that we are back to pre-North sea oil levels of imports and that we are obtaining an increasing volume of gas from Qatar to heat our homes. I accept that renewable energy remains at a smaller level of energy generation than we would all hope, although it has grown massively from negligible levels just a few decades ago. Even as a fracking sceptic, I accept that there is a debate to be had on how we continue to keep our homes warm, our cars moving and our factories working.

Oral Answers to Questions

Louise Haigh Excerpts

Tuesday 14th March 2017 Commons Chamber

[Christian Matheson (City of Chester) (Lab)]

12. If he will make an assessment of the effectiveness of his sector-based approach in delivering the aims of the Government’s industrial strategy.

[Louise Haigh (Sheffield, Heeley) (Lab)]

16. What steps the Government is taking to ensure that all sectors of the economy benefit from its industrial strategy.

[The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)]

We have had great success over the years in developing key sectors, including aerospace and the automotive sector. To build on this, we have set out proposals for new business-led sector deals in the industrial strategy. The first set of deals is already under development. We are taking steps to drive growth in sectors across the economy, including with funding for science, infrastructure and technical education.

[Greg Clark]

I assure the hon. Gentleman that that is not the case. I have regular discussions with the Federation of Small Businesses, the British Chambers of Commerce and smaller businesses right across the country. The supply chain, and making our country more attractive to supply chain businesses, are absolutely foundational to our industrial success, and that involves a particular regard for small businesses.

[Louise Haigh]

Cyber-security is one of the most important sectors for this country’s growth, but the UK has the highest skills gap in cyber-security in the world. Does the Secretary of State think that the Government’s current commitment to educate 1% of our students in cyber-security by 2021 is anywhere near good enough?

[Greg Clark]

The hon. Lady makes a very good point. If we are to take advantage of the opportunities that exist, we need to upgrade our technical education. That is why in last week’s Budget the Chancellor made such a clear commitment, prominent in the industrial strategy, to transform the level of technical education, including to increase by 50% the hours of tuition that are available. Cyber-security is one of the areas in which I would expect that to be applied.

Corporate Governance and Social Responsibility

Louise Haigh Excerpts

Wednesday 14th December 2016 Commons Chamber

[Louise Haigh (Sheffield, Heeley) (Lab)]

I thank you, Mr Deputy Speaker, for allowing time to debate this issue of critical importance today.

Having worked in corporate governance before I was elected, I am well accustomed to the fact that it is not a subject that excites or even particularly interests many people. I completely accept that, and it is demonstrated by how rarely it is raised or debated in this House. However, it is utterly fundamental to the workings of our economy and to how wealth is distributed across the country. What it essentially boils down to is this one key question: who does our economy work for?

In a year of global convulsions, that is a question being asked in unlikely quarters. When Mark Carney made his significant intervention, warning of “staggering inequalities” in an economy where many “lack a stake”, some voices said that he had strayed too far from his brief. Not only was his intervention appropriate, it was absolutely urgent, because while 75 companies on the FTSE 100 collectively made a profit of £32 billion last year, most ordinary people’s wages are predicted to flatline well into a second lost decade. That makes people justifiably angry and society less robust.

In is in that context that the Prime Minister’s corporate governance agenda should be seen, and although it was welcome that the Secretary of State for Business, Energy and Industrial Strategy should introduce proposals for reform, I am afraid that the signals are not good. The Prime Minister floated worker representation on boards on her first day in office, but then informed the CBI that that would be voluntary. In a statement to the House, the Secretary of State lauded his own success in bringing down average pay for chief executive officers from £4.3 million to £4.25 million—I am afraid that that is hardly a job well done.

I know first-hand the enormous creative potential that a well-functioning company, backed by a strong governance regime, can unleash. Unlike the Government, who appear to have stepped back from desperately needed reform, I know that the status quo cannot continue. It represents grotesque pay ratios between the top and the bottom, and astronomical executive pay. We have seen the corporate greed of BHS, Sports Direct, Gunstones, ASOS and JD Sports, which treat their low-paid workforce with little more than contempt; the behaviour of energy companies quick to hike prices to maximise profits, but slow to lower them when the market shifts; and the short-termism that has resulted in productivity flatlining and investment being stifled as directors seek to maximise shareholder value at the cost of everything else.

That is nothing short of a crisis of legitimacy in the shareholder model, because confidence is placed in shareholders that, in my experience, is undeserved and misunderstands the completely altered nature of shareholders in UK plc. Although I welcome the Green Paper, I fear that it clings to a model that belongs firmly in the last century. We are not dealing with the shareholders of 30 years ago, who had a stake in the UK and held shares for a significant period. In 1998, just a third of shares were owned by non-UK investors, but now the vast majority are owned by such investors. In fact, it is almost absurd to talk about shareholders as investors, as most do not hold the shares for long—some hold them for just seconds. The figures are contested, but the most reliable ones that I have seen suggest that the average holding period has fallen from eight years in the 1960s to just four months, and as much as 70% of trades are high frequency.

The equity chain is grossly over-intermediated, meaning that those with skin in the game have little or no involvement in the company at the other end of the chain. Investors tend to own only about 3% of a company at any given time. The notion that that fragmented group will clamp down on executive remuneration, or is interested in the voice of workers or the long-term contribution of the company to the communities that it serves, is either naive or disingenuous.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Lady for giving way in a speech on an important issue. Does she agree that the Government’s social responsibility does not lie simply in assessing how much GDP goes on benefits? It should be a living, breathing policy that takes account of the changing needs of the communities that the hon. Lady has discussed, rather than a document that is assessed at Budget time. Does she further agree that the previous Government’s big society ideal was never given the resources that it should have been given to take off? That should be considered and, indeed, reviewed.

[Louise Haigh]

I completely agree with those sentiments. Corporate responsibility is too often tacked on at the end of a company’s activities, in a completely separate report. It is not embedded throughout the organisation as it should be, which is why a strong, effective governance regime is vital to ensure that companies respect the communities in which they operate, the environment and their social impact.

At ASOS, despite the shocking evidence with which it was presented of mistreatment of its workforce, investors went ahead and backed the bumper pay package for executives. Why rock the boat when investors are getting their return? Since advisory votes on executive pay came into force, CEO pay has continued to climb to obscene levels, and the average vote in favour of remuneration packages has been a shocking 93%. The Kay review, commissioned by the coalition Government, which presented a fantastic analysis of the issues but fell disappointingly short on recommendations, said that

“the pursuit of shareholder value has distorted corporate principles”.

Rather than push against that open door, the Government seem intent on clinging to an outdated and inappropriate model that puts the interests of international shareholders above all else—above the interests of the workforce, of stakeholders, of supply chains and of the wider community. It does not make economic sense and it is deeply unpatriotic.

Yes, the shares in UK plc may rise and international investors will have their red letter day. What good is that if workers and communities here in this country do not feel the benefit? The Government cling to a model that says that hedge funds on Wall Street are more important, and should have a greater say over the direction of a UK company, than the workers whose mortgages, pensions and livelihoods are dependent on the success of that business. Rather than having a stake in the community, investors are increasingly coming to resemble buy-to-let landlords, skimming off profits with little interest in the community at large, yet they hold all the cards.

As the Bank of England’s Andy Haldane has said, if shareholders hold all the power,

“we might expect high distribution of profits to this cohort, at the expense of ploughing back these profits…or distributing them to workers”.

That is exactly what we have seen. Wealth for the 1% has grown unchecked while wages for the rest have stagnated.

It is not without reason that research and development spend in countries like our own is so low when the focus of investors and directors alike is on maximising the value of shares. That is why we need change. Our companies must look closer to home and above all to their employees, their supply chains and their communities, and give the people they rely on a stake. British workers create the wealth, the services and the products from which shareholders earn their reward. We should give them real influence in the businesses that they work for. We must modernise company law to correct the absurdity that denies employees a say but gives power to hedge funds.

If we give powerful voting rights to overseas investors who speculate in the shares of our major employers, it is right to give the programmer, the secretary, the driver or the picker who works for those businesses some power too. It is not about one or the other. It is about giving employees an equal stake. Having grappled with these issues in practice myself, I know that the big issue is that the more directors are accountable to increasingly anonymous investors, the more our top businesses end up being accountable to no one at all.

Preparing for today’s debate, I was reminded that Keynes wrote that bad ideas die slowly. He also wrote:

“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

I am not pretending that reform in this area is easy. If we are honest, the reforms to fiduciary duties by the last Labour Government have had little impact, given that conservative legal advice invariably prejudices short-term shareholder interests. That is why transparency has to be at the heart of any reform. Large companies should report qualitatively on their impact on their communities, their environment and their workers, in the interest not merely of corporate accountability but of good management.

Reforms to section 172 of the Companies Act 2006 will inevitably be an important part of that. The Financial Reporting Council made the point that more focused reporting on exactly how companies are complying with the various elements of section 172 is crucial. That may very well have to become a requirement, as surveys suggests that a large number of shareholders are not aware of the very section on which it is their duty to hold directors to account.

Today Mark Carney supported better reporting on climate change risk, which is undeniably material for a growing number of sectors. However, I have real concerns about how effective section 172 is. After all, it was introduced back in 2006 and since then we have seen some extreme examples of corporate excess and recklessness that have brought the economy to its knees and led to a bail-out of such astonishing proportions that we will still be paying for it for decades to come. Section 172 has been in force for more than 10 years, and in that time a director has had to have regard to the interests of the company’s employees, the impact of the company’s operations on the community and the environment, and the desirability of the company maintaining a reputation for high standards of business conduct. It would be almost laughable if it were not such a desperate example of the corporate neglect which has maligned this country for decades.

Throughout that time we have lacked a regulator with teeth, yet still the FRC says that it should be incumbent on shareholders to enforce the provisions of section 172. The fact that the FRC is only now commencing its investigation into KPMG’s audit of HBOS, some nine years after the collapse and bail-out, should tell us all we need to know. There is a serious problem with the enforcement of our corporate governance regime. The Government need to go much further if they want to see meaningful change. I am not convinced by the argument that we should leave such a crucial aspect of company law to shareholders who have so consistently demonstrated little interest in it and an authority seemingly unwilling to take action.

In its current definition, the duty to promote the success of the company under section 172 is seen as serving shareholder interest. As John Kay found in his review of equity markets, with share trading playing an increasingly important role in the strategy of investors, it is not at all clear how short-term investors can support the long-term good of companies. The long-term success of a company must therefore be codified in changes to section 172.

Changes in the legal duties of directors to prioritise the long-term success of the company at large over shareholders would be a significant shift, but it is one that many voices that previously advocated only minimal change are now calling for. Employees having a statutory role at board level must also be a line in the sand. The Government must not row back on giving workers an equal stake and, with it, bringing their different priorities and fresh perspective to the boardroom. Diversity is vital in governance terms—not for moral or representative reasons, but to challenge and address what Margaret Heffernan has termed “wilful blindness”.

With that in mind, I would like to ask the Minister what proposals she has discussed and considered. Much has been said about introducing a statutory role, with a third of the board being drawn from workers, whose representatives would themselves be elected. Has the Minister considered those specific proposals? What assessment has she made of the quality of reporting on environmental, social and governance issues and the impact it has had on internalising costs? Has the Minister considered the need for advisory panels to sit alongside the board, which would draw from those directly referred to in section 172, bringing a much-needed voice to directors’ responsibilities under that section?

Surely the long-term goal has to be allowing other stakeholders an equal stake in holding the board and directors to account. The Government simply cannot afford to row back on that reform. At the heart of it is the crisis that Carney referred to: people lack a stake, and they cannot see a way to exert influence.

When I was working in the City of London, the risk taking, bonuses and pay packets were viewed as the symbol of the corporate neglect that has done so much to shake trust in big business and that played its part in bringing our economy to its knees. No doubt those things were and still are grotesque, unchecked by shareholder power and in need of urgent reform. There is a crisis of legitimacy over who governs our companies and, in turn, whose interests they act in. The Government would be wise to seize that with both hands, because we cannot ignore it any longer.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I congratulate the hon. Member for Sheffield, Heeley (Louise Haigh) on securing today’s debate on corporate governance and social responsibility. I know it is an area in which she has a long-standing interest and considerable expertise born of her previous career—she and I share a business background. However, I listened carefully to what she said, and I do not fully recognise the picture of corporate life she has painted, although, certainly, some of it had strong resonance.

We require no reminder of just how important it is that business is conducted in a socially responsible way. There are over 3 million businesses in the UK, from small start-ups to large established businesses with a presence across the globe. They provide employment for over 26 million people. Whether large or small, they are a critical part of our society. They are not in some way separate from it. The way businesses operate and the decisions they take have a big impact on their employees, customers and suppliers and on the communities in which they are based.

The Government have a key role in setting minimum legal standards that businesses must meet in areas such as employment and consumer protection, environmental standards, and the protection of creditors in the event of insolvency. These provide a vital underpinning for business activity; it is the corporate and legal responsibility of business to comply with that framework, and I believe the vast majority do. Where businesses fall short, they are rightly held to account.

However, corporate responsibility and the way businesses manage their impact on society go beyond simple legal compliance. If we are to achieve our objective of an economy that works for everyone, we need more businesses to aim at the high standards of responsible business practice achieved by our best companies. The Government’s role in that context is to encourage those businesses that lead in good practice and to encourage others to follow suit.

The hon. Lady mentioned diversity in senior business management and at board level. We are encouraging business-led moves towards a more diverse and inclusive culture in the top management of our biggest companies that will set a lead for others to follow. Boardrooms should mirror wider society, and businesses should make the most of all the talent they have in their diverse workforces. We are following up the success in increasing representation of women on boards of our biggest companies by working with businesses to ensure that more talented women achieve senior executive roles. We welcomed the report last month from Sir Philip Hampton and Dame Helen Alexander, who are now pressing ahead with proposals to drive up the representation of women at senior executive level and build on the pipeline for female management and talent.

We also welcomed last month the launch of the report by Sir John Parker and his recommendations for addressing the worryingly low level of representation of black and minority ethnic directors in UK boardrooms. Half the FTSE 100 companies do not have ethnic minority representation on their board, and that is shameful. Diversity at the top of our businesses is about trust. It shows workforces that their boards are representative of them and that routes to the top are open to them. People want to believe that if they work hard they too can get there, whatever their background.

As the hon. Lady reminded the House, the Government have recently published a Green Paper on corporate governance reform in which we are exploring options for strengthening aspects of our corporate governance framework. The UK has a good reputation for corporate governance that combines high standards with low burdens, but this reputation can be maintained only if Government and business review and upgrade those standards from time to time. She mentioned several recent reports on corporate governance, which followed landmark reports by Cadbury, Greenbury and Hampel in the 1990s.

The Green Paper invites views on three main areas. First, it asks for views on options to strengthen shareholder influence on executive pay, to improve the transparency of reporting on executive pay, and to strengthen the link between executive pay and long-term company performance. The hon. Lady was right to point out that the gap between rising CEO pay and corporate performance had grown too wide in recent years.

Secondly, the Green Paper asks for views on options for strengthening the connection between the boards of directors of companies and their employees, customers, and other stakeholders. All the best companies know that there are economic as well as societal benefits to be derived from maintaining strong links with interested groups. However, we need to consider what more can be done to ensure that all UK companies are equipped with an appropriate model of employee, customer, and wider engagement.

Finally, the Green Paper seeks views on whether some of the features of the corporate governance and reporting framework covering quoted companies should be extended to our largest privately held companies. Many of these companies have an economic footprint that is equal to that of listed companies. For example, there are approximately 2,500 private companies with more than 1,000 employees. In asking these questions, we want to improve the ability of UK businesses to take decisions that are informed by a wider range of views and better support long-term company performance and sustainability.

[Louise Haigh]

I absolutely support proposals to extend reporting to private companies, but will the Minister comment on how effective the current reporting regime is? Some businesses certainly report at an absolutely excellent level. However, I used to have the arduous and unenviable task of reading through some of these reports, and for many companies it is just a tick-box exercise. The FRC is not sufficiently resourced in terms of staff or sanctions properly to enforce the regime on companies that refuse to report properly and raise their standards, as she rightly said, to those of the businesses that are doing well in this area.

[Margot James]

I agree that the standard of reporting on the non-financial aspects of corporate performance is mixed and varied. One of the purposes of our Green Paper is to bring the standards of the poorer companies in terms of reporting, and indeed within other parameters, up to the standards of the best.

One option is for companies to appoint individuals to company boards to represent these stakeholder views. In the case of employees, this could be someone who works for the company—a worker representative. There is nothing in UK law to prevent unitary boards from including worker representatives as full members. Indeed, such arrangements can work well for some companies, FirstGroup plc being the best-known example. But very few UK companies have adopted it. There are undoubtedly more companies who could benefit from this approach, and the consultation period provides an opportunity for the case to be made.

Given the huge variety of UK companies, it is unrealistic to think that one size will fit all corporate requirements. For other companies a different approach to workforce engagement will work better. That is why the Green Paper makes it clear that we are not proposing to mandate the direct appointment of employees to company boards. Instead the Green Paper looks to generate a debate on the range of options that companies can choose to improve the connection between boardroom and workforce. The best companies know that there are economic benefits to be gained from understanding and maintaining healthy relationships with employees and customers. The key point is to ensure that all companies are equipped with an appropriate model of engagement to deliver a stronger voice for employees and other stakeholders in the boardroom.

The hon. Lady mentioned section 172 of the Companies Act 2006. We are not consulting on amending the wording in that section, but we are consulting on whether, and if so how, companies could provide more information on the steps that directors are taking to fulfil their duties under that section. We are also consulting on how to strengthen the connection between boardrooms and other voices, as I mentioned earlier. We would welcome comment—the hon. Lady’s views will be considered, along with those of other interested parties—on how we could get companies to report more fully on how directors are fulfilling their duties under that section.

I am very grateful to the hon. Lady for initiating this debate, which has drawn attention to the key contribution that businesses can and should make to society. It has also provided an opportunity to set out steps that the Government are taking to raise standards in responsible business practice.

Question put and agreed to.