Wednesday 18 March 2015
[John Robertson in the Chair]
Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Wallace.)
I am delighted to open this debate on the important topic of women and entrepreneurship. I grew up above my parents’ shop in Osterley, just half a mile from my constituency, and I have spent time self-employed and running my own business. I have visited women’s business centres in America and the UK and I passionately believe in the need for an ambitious strategy to support women-led enterprise. I would like to acknowledge the work Hounslow chamber of commerce does in my constituency and across Hounslow to support women-led enterprise. A number of women have set up and started their own businesses in the community, making a huge difference to the local economy.
Women’s entrepreneurship has great potential for growth, creating jobs and wealth while reducing gender inequality. Women-led small and medium-sized enterprises already add £70 billion to the UK economy, yet women are only half as likely as men to start their own business. According to the findings of the Women’s Business Council, chaired by Ruby McGregor-Smith, CEO of Mitie, it is estimated that if women were concentrated in entrepreneurial activity at the same rate as men, there could be an extra 1 million female entrepreneurs. Indeed, according to the most recent OECD data, there is a gender gap of almost 50% in entrepreneurship in the UK: total entrepreneurial activity, defined as the percentage of the working-age population either in the process of starting a business or running a new business, among working-age women was 7.5% in 2014, lagging behind the rate for men, which was 13.5%. In the US, the rate is 11.2% for women, compared with 16.5% for men.
There are real challenges, therefore, in realising the economic benefits that can come from women-led enterprise, but that should not be the case. Research published last week by the business software group Xero, for example, found that women-led start-ups tend on average to lose less money and to have more success in winning new contracts. Emerging findings from research being undertaken by the Centre for Entrepreneurs suggest that, although women have entrepreneurial and growth ambitions, men seem to be better than women at realising those ambitions. Continuing to understand and to deal with the barriers to women’s entrepreneurship needs to remain a core part of our economic policy.
A review of that policy area in the UK shows a growing focus on women entrepreneurs since 1997. The then Department of Trade and Industry formed a women’s enterprise policy team in its Small Business Service, and in 2003, the then Labour Government published “A Strategic Framework for Women’s Enterprise”, which was the first policy response of any kind from a UK Government on the potential for economic growth if women were encouraged to start their own businesses in a similar way to men. The report set out targets, and the women’s enterprise panel was formed to advise the Government.
I congratulate the hon. Lady on bringing this debate to Westminster Hall. If I did not speak in it, my wife would be very angry, because she has been an entrepreneur for many years and has been very successful. Does the hon. Lady agree that to encourage young women to start up businesses or whatever, we need to start at the very root, in further education colleges, schools and universities, to encourage them to come out and use their skills?
I thank the hon. Gentleman for his intervention. He is absolutely right. Although the Government have made some progress on increasing enterprise education, we have a long way to go. One finding from research that I undertook last summer was that women who were starting their businesses later in life wished that they had had that education earlier. Women never know at which stage in their life they will be starting a business. It is increasingly common for both very young women and those who may have taken time out of the workplace to have children to become returners to start enterprises and suddenly find that they do not have the support or knowledge they need. I therefore thank the hon. Gentleman for his wise comment.
The Women’s Enterprise Task Force, established in 2006, took forward some of the work. Although not a delivery body, the WETF provided input to Government on key policy areas that affected women’s entrepreneurial uptake. The WETF produced several recommendations and directed and implemented Aspire, a £12.5 million women’s co-investment fund to support high-growth, women-owned enterprises. In 2008, policy developments taken forward included Government provision of enterprise support focused on women through the regional development agencies and Business Link.
In recent years, there has been a slow-down in support for women-led enterprise. Although the Women’s Business Council, formed in 2010, has done very important work, Prowess, the UK advocacy network for women in enterprise, has been scaled back to, in effect, a newsletter service, and the regional women’s ambassador programmes have been disbanded. For the recently published Burt report, a survey was done of local enterprise partnerships. The author wrote to ask all 39 local enterprise partnerships about their current engagement with women entrepreneurs, but only seven responded; of those, none had more than one female director for every three male directors and none had a strategy for promoting women in enterprise.
I remain extremely concerned that activity is being scaled back instead of pushed forward in the way the Government have reallocated resources for development programmes across the regions. The Department for Business, Innovation and Skills small business survey in 2014 suggested that women-led businesses fare less well over time than equally led or entirely male-led businesses. In 2014, 24% of one-year-old businesses were female- led and 45% were male-led, but of four to five-year-old businesses, only 14% were female-led and 49% were male-led.
I mentioned research on women and entrepreneurship that I undertook some months ago. Through a series of seminars and public meetings, I looked at three dimensions of the gender gap in entrepreneurship in the UK: the rate of business start-up, the sustainability of enterprises, and the speed of growth of female-led versus male-led enterprise. Findings from our focus groups research suggest that there is greater support for starting up an enterprise, as well as perhaps at the top end, but a lack of support for established women entrepreneurs in the middle who are looking to grow their enterprise and are struggling to find support and advice on how to do so. Access to finance can be harder to come by, with investors and banks assessing some women’s businesses as more risky. Indeed, one woman I met, who had set up a child care business in Reading, was turned down for investment by her bank because it could not understand her business model—frankly, it did not understand the business of child care. She remortgaged her house to put her own finance into the business, and went on to increase her turnover and to employ about 20 people.
The needs of this group of women are not being met, so their economic potential is not being realised. The key question that emerges is what more needs to be done by the UK to bridge the gender gap not just in start-ups but in growth and sustainability. Closing the gap means understanding better the circumstances and gender differences in entrepreneurship, so I will spend a few minutes talking about motivations and barriers.
We know that although women have the ambition to set up businesses and grow them, different motivations make entrepreneurship attractive to them. They can include pursuing social goals, a personal passion or a niche in the market, or seeking a work-life balance, flexibility or more control over one’s life. It is positive that young mothers are leading an entrepreneurial surge in new business start-ups—the high cost of child care and the easy availability of technology that allows businesses to be started and run from home contribute to that surge—but if our current statistics are anything to go by, those businesses will need support to survive and grow. A new breed of business women, dubbed “the returners”, has made an excellent contribution to the increase in the proportion of small and medium-sized enterprises run by women from 14% a few years ago to 20% today. The number of women over the age of 30 seeking start-up finance and mentoring has increased by a third in recent years. In some measures, therefore, we see some positive trends, but the research suggests that women-led enterprises have less of a chance of surviving and growing.
Barriers to growth may be encountered by female and male entrepreneurs. According to emerging research by the Centre for Entrepreneurs, all groups express concerns about cash flow and about getting the right people and skills, but women are more likely than men to identify child care and supporting their partner’s career as barriers that affect their own enterprise. They were also more likely to want specific business education—a point made by the hon. Member for Upper Bann (David Simpson)—face-to-face contact, and good mentors, in contrast with men, who specified that they sought advice.
That may shed some light on another gender-specific barrier: lower self-belief, as identified in research by Xero. A third of women said that a lack of self-belief had been the biggest barrier standing in the way of launching their small business, and it was the single reason most often given. In my research, I found that access to support and advice remains a problem. Women want forms of business education that are better tailored to their needs, and they raised with me the need for enterprise education in schools, so that young people can build entrepreneurial skills. We do not know who will become the entrepreneurs of the future, and that door should be open to children from a very young age.
In Liverpool, I saw an excellent example of networking and advice tailored to reach women when I visited the outstanding Women’s Organisation. Simply by moving the sessions to more family-friendly times, the organisation ensured that the number of women who attended business support events increased. The classic timing of business events and drinks right after work at 5.30 pm clashes perfectly with the time when kids are at home, or at after-school clubs, and dinner needs to be made.
Confidence can also be a significant factor in personal risk levels that may guide or limit the decisions that women make. Women may calibrate risk and confidence differently in taking tough decisions; they may also be less likely to see themselves as entrepreneurs than as business owners or founders, which may affect how they perceive and respond to marketing campaigns.
The Government have introduced some strategies, but there is still a long way to go. The Government published the Burt report, “Inclusive Support for Women in Enterprise” in February. That was helpful, but it is unfortunate that when the role was established, it was aimed at promoting and supporting female entrepreneurs, focusing on raising awareness rather than producing sound, evidence-based policy recommendations. The report recognises some initiatives such as StartUp loans, the enterprise allowance and local growth hubs, but it also suggests that there have been deficiencies in the way support has reached women, because it has been extremely patchy, rather than universal.
The report recognises the need to change some of our language around support, so that it looks and sounds more accessible and relevant to women entrepreneurs, who may search for it online. I am often struck by the huge contrast between the US Small Business Administration website, which has mainstreamed women’s business support and which feels customer-centric and targeted towards small business, and the website of the Department for Business, Innovation and Skills, which I believes serves Ministers more than it does those who seek access to services.
I welcome the fact that the Government have recognised the need to give diverse businesses diverse support. They have extended the types of support that may need to be provided to businesses set up by different people—for example, young people and those from ethnic minority backgrounds—to ensure that there is access and guidance for mentoring, networking and sources of finance. However, women have told me that they feel the Government’s support is located in a range of places and those who are looking for support find it hard to join up; they also find it difficult to identify what is really relevant and where to get the quality help they need. A page for women-led enterprise is attached to the GREAT Business website, but it feels like an add-on and a collation of bits and pieces. It could be far more integrated. I would be interested to know why the Aspire fund, a £12.5 million fund that makes equity investments of between £100,000 and £1 million on a co-investment basis, has so far invested only £4.7 million in women-led enterprises. It is certain that problems remain. As David Prosser wrote in The Independent last week:
“There is certainly a problem to tackle here. Government statistics suggest that fewer than one in five smaller companies are led by women. That’s not enough—not just because social justice demands equality of opportunity, though of course it does, but also because there is every reason to expect women-led companies to outperform.”
I will close with a few questions for the Minister. First, what cross-Government work is going on to integrate support for women-led enterprises at start-up and growth stages, and which Departments are actively involved? Secondly, what consideration have the Government given to putting the Women’s Business Council, which has done some important work, on a statutory footing so that it remains part of our business and policy-making infrastructure? Thirdly, why has the Aspire fund, which is designed to invest in women-led enterprises, invested only a third of its intended funds? Fourthly, which Minister is accountable for closing the gender gap in entrepreneurship, and whose dashboard is it on?
It is a pleasure to serve under your chairmanship, Mr Robertson. I am really pleased that this debate has been brought to Westminster Hall, and I congratulate the hon. Member for Feltham and Heston (Seema Malhotra) on securing it. It is a shame that there are so few hon. Members here from both sides of the House. We are discussing a really important subject, and it would be good to have more participants.
I know from my constituency what a key role women entrepreneurs can play, have played and will play in our communities and economy. I have some experience in the matter, because I set up a very small biotech company with two women entrepreneurs and two other colleagues. It was extremely successful in every respect other than having a product that actually worked; as it turned out, that was quite important. One of the women with whom I worked has continued in entrepreneurial roles, and I am delighted about that.
Too often, we do not hear about women entrepreneurs. They are not the stereotype; they are too often the unsung heroes, and we must do far more about that. There has been some progress in the past five years, as the hon. Member for Feltham and Heston has described, in support for women entrepreneurs, including the appointment of an ambassador for women in enterprise, my hon. Friend the Member for Solihull (Lorely Burt), who is upset that she cannot be here this morning. Far more needs to be done, however. No Government have yet got it right, and we need to go much further.
Let me pick up on some of the examples in my constituency. It being Cambridge, many of our successful women entrepreneurs are involved in the tech sector. One example is Lily Bacon, who co-founded the pioneering software company RealVNC. She worked incredibly hard to get that company up and running in perhaps one of the earliest attempts at crowdfunding. Remarkably, the initial money for the company came from selling merchandise bearing the company’s logo. It is quite impressive to be able to do that ahead of time, and that was entirely Lily’s idea. The company is now a world-leading provider of remote-access software, and it has won three Queen’s awards for enterprise in three years.
There are many others, such as Martina King, who is doing amazing work at Featurespace, Julie Barnes at Abcodia and Annie Brooking at Bactest. I particularly want to mention Emily Mackay, who is doing some nice work with Crowdsurfer. She started the company while she was having her first child, and she has turned it into something quite exceptional. Sherry Coutu is an angel investor who helps entrepreneurs in a whole range of things and who is really committed to evidence base. She produced the “Scale-Up” report for the Government, which was excellent work. Outside technology, to pick one example, we have Julie Deane, who co-founded the Cambridge Satchel Company in 2008 with her mother. Only a couple of years later, they were making at least 3,000 bags a week in the UK and selling to 86 countries. It is an amazing company that makes very nice bags, Mr Robertson, if you ever want a satchel.
To enable women entrepreneurs to thrive, we must set the right conditions across the piece. I will talk about finance later, but much of the issue is not directly about entrepreneurs. It is about our society’s attitudes: the explicit and implicit discrimination that holds women back. We have regressive attitudes in so many areas, and one of those attitudes implies that women cannot and should not be innovators in our economy, that women should not take risks and that women should go for a safer job. I come across that attitude all too often. It is not right, and it has no place in what we are doing.
Another issue is imposter syndrome, which has been highlighted by one of my former colleagues, Professor Athene Donald. Many people, disproportionately women according to Athene and others to whom I have spoken, feel that however they are doing, they should not really be there and that they have not really earned their position. Frankly, that feeling strikes all of us. Anyone who claims that they have never felt that they do not deserve to be where they are is probably either over-confident or not telling the truth, but the feeling is expressed disproportionately by women. I recommend some of Athene Donald’s writings and comments on the subject.
We must address, rebut and debunk all those issues to make more progress. There has been work done, and I particularly highlight the work of my hon. Friend the Member for East Dunbartonshire (Jo Swinson) in both her roles as Parliamentary Under-Secretary of State for Women and Equalities and for Business, Innovation and Skills in trying to send forceful messages about sexist dogma in the workplace and, more broadly, society. Similarly, we have seen the work of my hon. Friend the Member for Solihull.
We have made some progress. We still have a society in which it is expected that women will do a disproportionate share of child care. We need to break that apart, and we have introduced shared parental leave, which is important not only for women but for men; parental leave should be open to everyone. Having spoken to many female and budding entrepreneurs, I know that that is an important issue for them. We have also worked to encourage parity of pay for men and women. There is no reason why men and women should be paid differentially for the same job. We have seen the gender pay gap come down, and after some internal coalition disagreements, we are now introducing measures so that large companies will have to publish the average pay of men and women. There are a number of schemes for women entrepreneurs, some of which the hon. Member for Feltham and Heston has already mentioned. There is the women and broadband challenge fund, support for women in rural areas, the road show of mentoring events and much more, so we are making some progress but not enough.
I completely agree with the hon. Lady that we are not there, and so long as we do not have more women entrepreneurs, we and our economy are missing out on a pool of talented, able people who could contribute much more. Research by Enders Analysis shows that raising women’s employment to the same level as men’s could lift GDP by 10% by 2030, which we should all want. As she said, the Women’s Business Council has said that if women had the confidence and support to start businesses at the same rate as men, the UK would be home to an extra 1 million female entrepreneurs, which we would all welcome. We are missing out, and we are doing too badly. Women majority-own only about one business in five, and they are about a third less likely than men to start a business. There is a lot to do.
We need to ensure that education is far more gender-neutral and to encourage women to take subjects that are not seen as traditionally feminine. I recently looked at the application rates for different subjects at the university of Cambridge in my constituency, and there is huge discrepancy between the subjects for which women do not apply and the subjects for which they do. We have to change that. Computer science is at one end and education is at the other. There is no good reason for that, and we have to change it. One thing we would like to do is to change application rates in science, technology, engineering and maths. We support initiatives such as the STEM diversity programme to address gender stereotypes. We need to ensure that each school has access to a female science champion to encourage the idea that women can be successful in technology and science.
The hon. Gentleman is making an excellent speech. He reminds me that my sister studied engineering at Cambridge and now works with racing cars in America. He makes an important point about how we can attract more women into subjects that have not been female-led. Does he have a view on how we can build a stronger connection between schools and women who are running businesses and who have been successful in science or technology? Those women can be great role models and can encourage more women to come forward.
The hon. Lady is right that we have to do far more. In fact, her sister could perhaps be doing some of that. Various studies have asked people to draw an engineer, and almost invariably the person they draw is a man. We have to break that stereotype. There have been some great examples and, rather embarrassingly, I have forgotten the name of the brilliant engineer who worked on the Shard project. She featured in some of the television programmes, and I have met her, but I do not remember her name. She has gone out to try to encourage people in schools, which is essential. We need to show that there is diversity and that people from all walks of life can do it, whatever their background. The hon. Lady is right to raise that issue.
Female entrepreneurs have a particular issue with obtaining finance. Even if they have the background, the idea and the confidence to go for it, access to finance can be very difficult. As the hon. Lady said, banks can be very unsupportive of women entrepreneurs. Studies in the US found that when banks changed their approach to female enterprise, there was growth in female entrepreneurship. I am not saying that we should necessarily copy exactly what was done in the US—it might not exactly work here—but we should try to change the banking culture. We should work with the British Bankers Association to find information on lending to female entrepreneurs in England so that we can see how we can change it.
There are also non-bank funding issues. At the initial stage of funding, women are apparently rather more concerned to seek the three f’s: friends, family and fools. It can be difficult to ask people for money at that stage. There are similar figures for angel and venture capital investment. Only 8% of angel and venture capital investment goes to companies that are run or co-founded by women, which is an astonishingly small fraction. One ray of light is that we are seeing crowdfunding and equity crowdfunding, and 41% of successful equity crowdfunding goes to companies that are run or co-founded by women—we are seeing much more.
Amanda Boyle, the chief executive officer of Bloom VC, has talked about how crowdfunding is opening access to women. I do not have the figures with me, but I understand that men are still more likely to ask for money but women are more likely actually to get the money, which is changing the dynamics. I support all the recommendations of the report by my hon. Friend the Member for Solihull on inclusive support for women in enterprise.
I have spoken at length on some issues, and far, far more could be covered. It is good that we are having this discussion, and it is good that we are trying to make a difference. Whoever forms the next Government, and whoever is in the next Parliament, I hope that women entrepreneurs will be prioritised. So long as we have a society that stereotypes and gives the impression that women should like pink things and should be doing feminine jobs—we have no truck with those attitudes here—we will be weakening our economy and making our society less fair, which is the exact opposite of what we want. We want opportunity for everyone.
It is a pleasure to speak in this debate, which I thank the hon. Member for Feltham and Heston (Seema Malhotra) for securing. I note that my party, the Democratic Unionist party, has the most Members in this debate. I am sure that is not a reflection on the other parties’ interest in this matter, and I am sure everyone would be down here if they did not have other things to do. Those of us who are here underline the importance of supporting women entrepreneurs.
I recently read an article on nibusinessinfo.co.uk stating that:
“If as many women as men were thinking of setting up a business in Northern Ireland we would have over 28,000 more entrepreneurs.”
To put that in perspective, if it created 28,000 new jobs—it would probably create more—there could in theory be zero unemployment in Northern Ireland. That is a possibility, and it would have a dramatic and positive effect on the local economy. That idea is not far-fetched. We must encourage ladies in Northern Ireland to be entrepreneurs, and we must ensure that they have a chance to do so. The article continues:
“The Global Entrepreneurship Monitor (GEM) report shows that women in Northern Ireland have a very positive view of entrepreneurship as a career choice.”
Entrepreneurship is not alien to women in Northern Ireland. They do not find entrepreneurship strange; they want to sign up to it.
“The report indicates that increasing the level of entrepreneurial activity among women will make a huge contribution to the diversity and success of the local economy.”
The Library debate pack has made me aware of one negative. It refers to:
“better support structures for women—think mentorship and networking”.
On the other hand, there is a problem with such an approach. If women are not starting businesses because they lack the confidence to do so, singling them out as a group in need of special treatment risks undermining that confidence even further. So there is a negative, and there needs to be a balance. At a women’s networking event at Middlesbrough football club in 2000, one of the award winners was south Wales-based Christine Atkinson, who said:
“Lack of confidence is so pervasive.”
Again, we cannot ignore that.
I thank my hon. Friend for that intervention. His business expertise is good for this Chamber and for the House. He will not mind my saying this, but a part of his success is his wife. I mean that genuinely. My hon. Friend and his wife have a business partnership and they both work equally hard. The success of that business is due to the efforts of both of them. He and I know that, and his wife knows that as well.
When women take it upon themselves to launch businesses, often it is to beat the high cost of child care. Perhaps the Minister will address that issue. Child care costs are a big factor in whether ladies are able to start their businesses and move forward.
It is always good to give an example. A retired lady comes to my office. She does craft work and makes bits and bobs to help to raise money for orphan projects in Africa. I am amazed at her ingenuity at times. For example—my colleagues will know this—I am apt to give out business cards. As Members will know, they come in wee plastic boxes. Given the amount of business cards that I have given out over the past five years—and long before that—there are a lot of those wee plastic boxes. She has turned those wee boxes into memory boxes and she fills them with little cards with a poem on them or a thought for the day. She does that for her Elim church mission to raise money for Africa. She has used her skills as an entrepreneur and her skills in crafts to create a business of sorts. If that did not come under charitable purposes, I have every certainty that she could make enough money to live on with all the crafts and things that she sells. That is what an entrepreneur does—that is what it is all about—and that is a lovely example of what can happen.
Does my hon. Friend agree that whenever there is a successful woman locally in business, quite often she is perceived and projected in the local press as achieving success against the odds in an uphill struggle? It is almost a perception that the woman is not a natural fit within a particular system, rather than giving encouragement that this is an automatic thing. It ought to be a natural phenomenon, rather than something that is the exception. It should become the rule and the norm.
My hon. Friend is absolutely right. It should not be something that happens against the norm, but naturally. We welcome every business start-up, and we want to ensure that women do not feel out of place by starting a business.
The reign of the internet is now allowing more women to use their skills in a way that will benefit them. It is not simply men who are now suiting themselves with their working hours and flexible dot.com businesses. One need only look at Facebook to see how people use that medium to display their abilities. We can have anything personalised and sent almost overnight by those who choose to make the best of their time on the internet. There are many possibilities and opportunities. This is entrepreneurship at its best.
I recently met a man and a woman who own a few clothing shops in my constituency and in the neighbouring constituency. They realised that the potential for online shopping was within their grasp and expanded to include that. A business that had a turnover of £3,000 in its first few months will this year have a turnover of £1 million in online sales. That gives us an idea of the possibilities that there are. We had a meeting this week with the Department of Enterprise, Trade and Investment, and we want DETI and BT to ensure that better broadband is available for shops to make the work a lot easier. The fact is that those people saw an opportunity and took it, and we need to encourage more women—and men—to take such opportunities.
In Northern Ireland, the average age for a female entrepreneur is late 30s. The hon. Member for Feltham and Heston referred to that figure in her introduction, but anyone of any age can be an entrepreneur. Opportunities should be there earlier. Many women work part time while setting up a business, which gives them the chance to develop their business idea, while reducing the financial risk that may be involved. Others work flexible hours in their new business to allow them to look after a home or to fulfil other commitments while getting their business off the ground. Sometimes women have to care for elderly parents or their partners or children. We need to help people who have caring responsibilities.
The hon. Gentleman is making a powerful point about older women coming into entrepreneurship. There is no age barrier and someone can start a business when younger or when circumstances are different, but then need to accelerate later. Does he support my call for a more integrated approach to supporting women’s entrepreneurship, which has the backing and support of a range of different Departments where they may have different ways of interfacing with women’s lives?
I could not have said it better myself. I thank the hon. Lady for that intervention. Clearly, we need all Government bodies to work together to encourage people at whatever age they decide to start a business, whatever the reasons for starting at the time they started, and whether they are caring for a disabled relative or have family responsibilities. Whatever time they start a business, let us encourage them.
The opportunities are endless and it is clear that help and support should be given by the Government to allow people to understand how best they can begin a new business. In Northern Ireland, Invest Northern Ireland, in partnership with the Department of Enterprise, Trade and Investment, has help available. Indeed, it has a mentor programme. Perhaps the Minister and shadow Minister will say whether there is a mentor programme here in the UK mainland. If not, may I suggest they look at what Invest NI and DETI are doing in Northern Ireland? New starts are helped. There is a Training for Women website that has useful courses and guidance, and a lot of other help available.
Women into Business is Northern Ireland’s premier business women’s programme aimed at encouraging and supporting the progression of women hoping to enter or re-enter the workplace through employment or self-employment. Women in Business NI—WIBNI—is Northern Ireland’s largest and fastest-growing network for business women and entrepreneurs. WIBNI has more than 1,000 members and offers events aimed at helping women develop both personally and professionally, and to make connections and ultimately grow their business. WIBNI also offers a variety of free marketing benefits to all members, including publication of their news articles in a quarterly and a monthly magazine.
DETI and Invest Northern Ireland have worked out a strategy to encourage women in business and entrepreneurs in Northern Ireland. My hon. Friend the Member for Upper Bann (David Simpson) mentioned the importance of further education colleges. We see lots of good students coming through and taking up courses. The South Eastern Regional College does tremendous work in Newtownards and in my constituency, Strangford. It encourages young people when it comes to business start-ups and ideas, and helps to move them along the way. There are as many young girls and young women as there are young men involved in that college and those courses, and it is good to underline that as well.
There is an onus on the Government to offer help; more help can and should be offered. Again, I congratulate the hon. Member for Feltham and Heston on raising this issue today and on highlighting the great work that has been done, and the fact that there is the potential for so much more to be done, if only more support were offered.
It must be remembered that the greater the success of new businesses, the greater the benefit to the local economy and to the country as a whole. So, whether a woman wishes to create her own business at home, or open a shop, or indeed five shops or 10 shops—whatever their potential dream or wish may be—the advice and support must exist to help them do so. And the onus is on those of us in this place and in Northern Ireland, where this matter is a devolved one, to ensure that that advice and support are provided.
It is a pleasure to serve under your erudite chairmanship and beady eye this morning, Mr Robertson; you will ensure that all of us are well-served this morning.
I congratulate my hon. Friend the Member for Feltham and Heston (Seema Malhotra) on securing this debate. I know that this is a subject she is really passionate about. She has done a lot of research on it, which really shows in the insight she offers into it and the things that we can do about it.
I also want to put on record my interest in and support for the fact that there are a number of MPs here. May I venture to say to the hon. Member for Upper Bann (David Simpson), who sadly has now left Westminster Hall—
I am pleased that the hon. Gentleman will be back, because it is good to see male MPs supporting the idea that there is a gender gap that needs to be addressed. However, may I venture to say that that is not necessarily a concern because of his wife but because when 51% of the population are not fully utilised it is a concern for us all that we are missing out on the contribution that they could make? Frankly, sorting this issue out would help a lot of men, because it would help our economy, and therefore it perhaps has less to do with his wife and more to do with his constituents. It is because of them that he should be concerned about why we have such a gender gap. In particular, my hon. Friend set out well the particular gender gap that we see in the UK, because the situation is not the same in other countries, which should be very telling about what we can do in this country to address these issues.
A number of Members have already pointed out that there would be many more businesses if women were starting up businesses at the same rate as men. However, it is worth considering the situation in other countries. It is not only America that has a higher level of female entrepreneurship than the UK but countries around the world. Therefore, there is something happening in the UK. It is also worth noting that we have a higher rate of churn in the UK, so even when women start up businesses here they are failing more often than in other countries. Women entrepreneurs here are also less likely than elsewhere to attribute the closure of their business to business failure and more likely to cite personal reasons as one of the reasons why their businesses were not successful.
Why does this issue matter to us all? It is because equalising the labour market participation rates of men and women would boost the UK economy by an average 0.5 percentage points every year, with a potential gain of 10% of GDP by 2030. Given the recession that we have just gone through and given the fact that our recovery appears to be beginning to slow, getting more women into business and into leading more businesses would clearly make a tremendous difference to us all and our future economic position. Indeed, the Royal Bank of Scotland has calculated that boosting female entrepreneurship could deliver an extra £60 billion to the UK economy.
As always, the shadow Minister is making an excellent speech. She raised the issue of female participation in the labour force and the important contribution to the economy that could be made by boosting the number of women entrepreneurs. Does she also see this situation as an opportunity for us to see women not only as entrepreneurs but as the employers of the future, who employ others and make changes as their businesses start to grow?
My hon. Friend has pre-empted one of the points that I was going to make, namely that this issue is not just about women employing themselves. Indeed, all the evidence suggests that on the whole women’s businesses tend to be better at creating jobs than men’s businesses, because women’s businesses are generally more labour-intensive than men’s businesses. Again, I go back to my initial theme that it would do men, and not just women themselves, a big favour if we could get more women into business.
Therefore, it is worth asking ourselves why we are not seeing that kind of progression in the UK, given that we need it within our economy to make it more stable. My hon. Friend set out the admirable record of the previous Government in bringing forward this agenda and I am very proud of the previous Government for making women’s business a priority for all, and not just for women. However, as the hon. Member for Cambridge (Dr Huppert) rightly said, we have all seen that the progress on this issue has been too slow. Since 2008, the percentage of small and medium-sized enterprises run by women in this country has only gone from 14% of the total number of SMEs to 20%, which is a 6 percentage point increase in that time period. That is simply not good enough. As a result, women own only about one business in five in this country. When we compare that with America, where women are twice as likely to be entrepreneurially active as women in the UK, even though the rates of entrepreneurship for men are very similar for both countries, that tells us the problem that we face here.
In that same time—the period since 2008—it is also worth reflecting on just how quickly women’s employment in and of itself has changed. Not only have women been hit disproportionately hard by the Government cuts but in terms of unemployment. Therefore, it is not a surprise that in the boom in self-employment that we have seen in this country in the last five or six years, women have accounted for much of that growth. Women account for under a third of those who are in self-employment in our country, but more than half of the increase in self-employment since 2008 has been among women. In fact, between 2008 and 2011 women accounted for an unprecedented 80% of the new self-employed people within our economy, which means about 300,000 more women going into self-employment since the economic downturn.
What sort of businesses might those new businesses be? I am sorry to see that the Members from Northern Ireland in Westminster Hall have now shrunk down to one—the hon. Member for Strangford (Jim Shannon)—but I hope that it is a case of quality not quantity. The hon. Gentleman himself talked about online shopping and women using their interest in that to drive business. What we have certainly seen is a boom in the internet economy and the opportunity not so much to shop online as to sell online; we have certainly seen that women have been taking advantage of that opportunity. I would wager that that is not so much because of women’s interest in shopping but because of the reduction in barriers to entrepreneurship that online activity creates. The fact that now someone needs only a few hundred pounds to set up a business rather than several thousand pounds, because it is possible to sell online, changes our economy in substantial ways. Indeed, online businesses have accounted for almost a quarter of total UK growth in recent years, and much of that has been driven by new entrants into the market, including women benefiting from the fact that they can combine work around some of their other commitments to get into that online business.
The shadow Minister is making an excellent point and I am reminded of the excellent phrase in the book, “A Woman’s Place is in the Boardroom”, by Peninah Thomson, in which she talked about the “customer being queen”, because of the fact that women are responsible for more than 80% of retail purchases, or decisions about them. Does my hon. Friend agree that that highlights even further the need to focus on women and what they can bring to our economy through setting up enterprises? The fact is that when women make decisions about what to purchase for themselves and their families, they understand the market so much more than men, and when they come forward and start businesses they are often filling niches and going on—just as Anita Roddick did with the Body Shop—to be hugely successful.
Again, my hon. Friend shows her experience in this area. What we are certainly seeing is that women who start businesses tend to bring forward new products, as opposed to men who start businesses, who tend to bring forward competitor products. So women are certainly driving innovation.
My point in referring to the online economy is to set on the record that Labour thinks this issue is less about women bringing their previous experience of purchasing to business so much as their ability to use the opportunity that online behaviour offers to open up markets to people. When someone is bringing a new creative product to the market, having a window that sells to millions of people rather than perhaps having a window just in their local high street opens up the potential for greater success, and it is important that we consider that and ask ourselves how, for example, we can support more women to learn skills, such as coding, to be able to sell online.
A number of Members today have obviously focused on women themselves and what might be stopping them from getting into business. Certainly, one of the issues that people have come up with is child care. So let us be very clear that there probably is an issue around child care and helping women to be able to juggle, which suggests men are holding women back, because, after all, it takes two to have a baby. One thing that I would be interested to hear the Minister’s view on is how we can make men hold up their part of the bargain in looking after children, so that their wives can be the successful entrepreneurs that they want to be.
Labour’s child care proposals will probably help a lot of women entrepreneurs. For example, there is our proposal to increase the number of hours of free child care that are available. With child care costs rising by up to 30%, there could be many parents—for example, the women who want to be the next Anita Roddick or Laura Tenison—who find their ability to be entrepreneurial being hampered as a result of this Government, because they find they cannot afford the child care necessary for them to spend the time setting up a business.
Today, therefore, I will set out four areas that I would like to hear the Government’s response about. They are less to do with women and more to do with the environment that we are asking women entrepreneurs to enter.
First, hon. Members talked about finance. Clearly, finance matters. The evidence shows us that women start businesses undercapitalised, and with not just less finance, but fewer human resources and less social capital. That puts them at a disadvantage by comparison with their male counterparts. Not having the same level of resource is a factor in respect of confidence and risk-aversion among female entrepreneurs. It is important to say that it is not always a bad thing that women are risk-averse, but we should recognise it when they do not have the same resources, and so cannot take the same risks, as their male counterparts. We must consider how to ensure that they have access to more resources, rather than encouraging them to take more risks, and we should recognise that their lack of confidence may not be misplaced and that they might not have the resources to succeed.
How much of a barrier is finance? Some 10% of female entrepreneurs say that access to finance is their only barrier to entrepreneurship, and that it is a particular challenge in respect of expanding in the way they would like to. Again, that appears to be a bigger problem in the UK than in other countries, particularly in Europe. Women in Europe are much more likely to be able to access finance to start and run their businesses than their UK counterparts. Some 20% of women in the UK have tried to get money to start a business but have been turned down, compared with only 11% of European female entrepreneurs.
My hon. Friend talked about the Aspire fund, which was set up in 2008 to try to deal with this challenge and ensure that there was a dedicated pot of money to support women in business. As she said, as of last year only £4.7 million of the £12 million had been invested. It is worth comparing that with other forms of start-up finance backed by the Government to see what the difference is. For example, in the same period, the enterprise finance guarantee scheme, set up to provide assistance to small businesses with an annual turnover of less than £41 million, has offered £2.6 billion, and £2.3 billion has been drawn down. The regional growth fund, which matches private finance with public assistance, has awarded £2.6 billion, of which £1.15 billion has been drawn down. There is a differential. It would be interesting to hear the Minister’s view on why the Aspire fund has not been as successful in promoting and supporting women’s businesses as some other start-up funds.
Research by Strathclyde university states that decisions regarding women and finance are based on the interaction between women, who may lack confidence—perhaps because they recognise that they do not have the same level of resource to start a business—and those offering them finance, who may have a certain attitude and approach. There is an interesting challenge for us: if we can change the attitudes of those offering finance—for example, through the Aspire fund—will more women go into business?
Secondly, we have to acknowledge the issue of confidence. I challenge slightly the vicious circle that the hon. Member for Strangford mentioned: he said that dedicated schemes for women could undermine their confidence. I assure the hon. Gentleman that the other way of looking at that is that it recognises that they are a priority. Dedicated schemes, with mentoring and support for women, recognising that there is a gap, and bringing other women forward are helpful and supportive.
Some 38% of women in the UK, compared with just 3% of women in Europe, take advice from Government business support projects. Women are more likely to use all forms of business support than men, whether public or private, and are more likely to access support from professional services. It is important that mentoring schemes exist. It matters that other women are in business, because you cannot be what you cannot see. It is a simple principle, but seeing other women being successful in business offers a road map for women, showing them how they could be successful.
I pay tribute, as other hon. Members have, to a women’s business forum in my constituency. I venture to say that that forum, run by the amazing Jo Sealy, is more successful than our general business forum.
I just want to go back one sentence, with the hon. Lady’s permission, and talk about confidence. I was saying that we all have different natures. I have a different nature from other gentlemen in this Chamber, and the hon. Lady is different from other ladies here. It is important, when encouraging ladies to take a job up or move forward with their idea for entrepreneurship, that it is done in such a way that their confidence is encouraged. It is not that what is happening is not right; it is right for some, but perhaps not right for all.
I thank the hon. Gentleman for his clarification. My point is that he was querying whether a gendered approach to mentoring might not be counter-productive. I wanted to reassure him that such an approach is important for a lot of women, because it shows them a road map of where they could get to.
I also pay tribute to Simone Roche of Women 1st, Kate Hardcastle of Insight with Passion, Bev Hurley of Enterprising Women, Heather Jackson of An Inspirational Journey, and Margaret Wood of Opportunity Plus, who supports older women entrepreneurs. There are a number of schemes out there, and what they all have in common is that they were set up by women volunteering. Some of them have become social enterprises. I share the concern of my hon. Friend the Member for Feltham and Heston that, over the last couple of years, the work to support women doing that work has been downgraded. My second question for the Minister is: does he share our concern and think there should be a renewed effort to support and prioritise those mentoring networks, not just in local enterprise partnerships?
My hon. Friend and colleague the Member for Feltham and Heston is a fan of the work of the national Women’s Business Council, which was set up for a year as an independent body. Does the Minister think there is a case for making that a perpetual scheme and for considering how it could support mentoring, using and drawing on the experience there?
Thirdly, with regard to women finding it hard to see other women whom they might aspire to be, does the Minister share my disappointment and concern about the slow pace of progress in getting women into leadership positions in business across the piece? He must be disappointed with the slow pace of change, given the diversity dividend that comes from getting more women into boardrooms. He must also share the disappointment of his colleague, the Minister for Business and Enterprise, about the decisions of many businesses to appoint women to non-executive positions. The vast majority of women who have gone into leadership positions on business boards during the past couple of years have simply been appointed as non-execs and have not been in decision-making positions. I know that the Minister will be worried about that unacceptable situation, because it sends a message to women entrepreneurs that there are not women to trade with. Does he think that there is now a case for getting on with looking at what quotas could offer us, in respect of non-exec and exec positions, and the way that businesses are working with women?
My final questions to the Minister are about women to trade with. There is a slow pace of change when it comes to not just women in boardrooms and in entrepreneurship, but women to trade with. In a world economy, the way our businesses work with other businesses could provide huge opportunities for women entrepreneurs, but at the moment, women-owned businesses are winning less than 5% of corporate and public sector contracts.
The Government’s adviser has called for the Government to collect data on diversity in procurement processes, and said that the pre-qualification questionnaire should ask about women-owned business. Is the Minister concerned that the talk about removing the pre-qualification questionnaire for contracts smaller than €250,000 may mean that we will not see that level of engagement with the question of whether the Government are selling to women and doing all they can, through their own supply chain, to promote women’s business?
Although UK Trade & Investment measures women-led firms that export, we do not measure women being sold to and traded with in our economy. The Government have dismissed the idea of having a quota for tenders and the idea of measuring the number of women being sold to, although clearly that would help us understand the scale of the challenge and whether the Government are doing what they can. If the Minister wants insight into what difference that could make, he should look no further than that socialist utopia, the United States of America, where some 30% of all businesses are majority female-owned and the number of women-owned businesses continues to grow at twice the rate of all US firms. Women are increasing their economic clout and driving the American recovery. That is not happening by accident; it is being driven by the US Government’s deliberate choice. The USA Women’s Business Ownership Act 1988 put in place long-term infrastructure to support women’s enterprise development. The quotas and targets set by the US Government for women in their supply chain are changing the behaviour of companies in America.
In 1994, the federal Government established a 5% spending goal for federal agencies to encourage contracting with women-owned small businesses. That target has not yet been met, but it is almost being met and it is making a massive difference to women entrepreneurs in America. Indeed, it is changing the debate not just in the public sector in America, but in the private sector. Companies such as Walmart—again, not perhaps seen as a socialist leader, if the Minister is worried about that—have introduced “women-owned” labels since last year, allowing consumers to clearly identify products created by women-led businesses and buy accordingly. That company sees a commercial interest in this.
The Minister may be worried that I am talking straight away about bringing in a direct quota for selling to women. I recognise that first and foremost we have to ask the question, so will the Minister commit the Government to asking, in the public sector, about selling to women and to starting to monitor just how women’s businesses are being traded with in this country? Through that, we can understand the gaps in the industry. Perhaps there is a role in that for the Women’s Business Council and that dedicated lead on women’s entrepreneurship and business that my hon. Friend the Member for Feltham and Heston set out so clearly as being required.
Ultimately, if we want to give women confidence that their businesses will be supported, that they will be successful and that we can bridge the confidence gap, we have to show that the issue is a priority. The Opposition are committed to that; I hope that the Minister will show a similar commitment, so that we can all benefit from the increase in economic activity and productivity that bringing more women into the UK economy would offer.
It is a pleasure to serve under your chairmanship, Mr Robertson in the closing phase of this Parliament. I congratulate the hon. Member for Feltham and Heston (Seema Malhotra) on introducing this debate on Budget day—an important day, when attention will be rightly focused on the Government’s initiatives to support business and entrepreneurship. As a Business Minister, it is a pleasure to be here and to be able to respond to the debate. I pay tribute to the Members who have spoken today. We heard powerfully from the hon. Member for Strangford (Jim Shannon) on some of the good practice in Northern Ireland. I was there recently celebrating and supporting the Northern Ireland life sciences cluster. He made a powerful point about the importance of rebalancing the Northern Ireland economy from public to private sector and the role of women entrepreneurs in that. He also made an important point on mentoring—I would be interested to look at the scheme he mentioned—and also touched on child care.
The hon. Member for Feltham and Heston made a number of points and I will try to deal with them in my speech, as well as to answer some of her specific questions. I pay tribute to the large number of women who have contributed to the driving of the agenda outside this House. A number of pioneering entrepreneurs and women in policy have been mentioned today. It is another area where more needs to be done. I am proud of what this and the previous Government have done, but the Government agree that we need to keep our foot to the pedal and keep at it.
I particularly thank and congratulate those behind the Aspire fund, the taskforce and the Women’s Business Council for their work. The subject is close to my heart, partly because I have a 14-year-old daughter whose career I take a close interest in, and partly because I come from a 15-year career in the entrepreneurial sector in Cambridge and elsewhere around the country starting high-growth technology companies, particularly in the life sciences. In that sector, I am glad to say, there is a proud record of women achieving very highly both in our larger companies—I recently met a delegation from GlaxoSmithKline, and Members will be delighted to know that all five representatives were women—and in the smaller companies. There are huge opportunities for women in life sciences, both at the bench and in driving small businesses.
Women and entrepreneurship is also an area of interest from a policy point of view. Through the 2020 Conservatives group, I have set out a number of measures on how, in driving the rebalanced economy and the long-term economic plan, we have to liberate the entrepreneurial talents of all our citizens, and in particular reach into those areas where we have not properly unleashed them before. It is clear from what Members of all parties have said this morning that there is a lot of latent entrepreneurial talent in our female community. In our inner cities and our black and minority ethnic communities, there are incredible rates of entrepreneurial activity that we have not recognised, properly reached into and supported. Family finance supports a lot of our small businesses in some very business-hostile environments in some of our inner cities.
In the public services—before the shadow Minister leaps to her feet, I do not mean privatisation—we should unleash the spirit of entrepreneurship and the talents of people in the public services to deliver more for less. The economy nationally needs a strong focus on unleashing that spirit of enterprise. That does not always mean for-profit or very acquisitive, venture capital-backed businesses; it means a culture of delivering more for less and innovating. We need that to modernise our public services and to continue to drive the recovery that we are leading. The subject is close to my heart, and on Budget day it is close to the Government’s mission more widely.
The truth is that small businesses are the lifeblood of our economy. Every village, town and city in Britain contains shops, garages, cafes, manufacturing firms, hairdressers and so on. We take those small businesses for granted, but they are backed by enterprising and hard-working people who are taking risks to run those businesses. Responsible society depends on the ties that bind us, and as well as the economic benefits it brings, an entrepreneurial, small business economy does something else: it builds the ties and social capital that link communities.
The Minister is making a powerful response, saying what he feels he can do. One of the growth industries in my constituency and across the whole of Northern Ireland, particularly among ladies, has been the craft industry, where there are special talents and the ability to create products for sale. The Minister mentioned shops, small businesses and restaurants and so on, but the craft industry could release enormous talent and job opportunities across the whole United Kingdom. What are his thoughts on that?
The hon. Gentleman makes an important point. I was about to talk about the importance of small business in driving innovation if we want an innovation economy. Small businesses tend to be quicker to adopt innovation and to drive it. They are a force for insurgency in the economy. In tourism and crafts, we should not forget that small businesses are important in our theatre, media, digital and tourism sectors. A culture of empowering people and unleashing the talents of women in every walk of life is incredibly important if we are to build a diverse and strong economy and a strong and linked society.
That is why I am absolutely delighted that the UK is a truly great place to start a business. This year we have seen data confirming that 760,000 small businesses have been created in this Parliament since 2010. We are backing business every step of the way, making it easier to start, succeed and grow. We will hear about more such measures in the Budget later today, I have no doubt. I am delighted, too—but not complacent for a minute—that in 2013 there were more women-led businesses in the UK than ever before: 990,000 of our SMEs were run by women or a team that was more than 50% female, an increase of 140,000 since 2010. We know that more needs to be done, and we need to build on that positive momentum. I am also delighted that in the UK, women-led small businesses are contributing £82 billion to the gross value added of the UK economy.
Before the debate, I looked at the latest data, which are even more encouraging. The data from the Office for National Statistics for October to December 2014 show that there were 1.45 million self-employed women in the UK, which is 42,000 more than in the previous quarter and 281,000 more than in May to July 2010. Some 672,000 of those self-employed women were working full time and 778,000 were part time.
I pay tribute to the work of the Women’s Business Council and the important policy work that it has done and intends to follow up. It has rightly, as a number of Members have highlighted, pointed out that if we had women starting businesses at the same rate as men, we would have up to 1 million more entrepreneurs. That is a good reminder of the latent potential that we need to continue to drive at.
One or two Members asked about the Government’s commitment and which Minister is responsible for this. I am delighted to say that a number of Ministers are responsible. The Minister for Business and Enterprise leads on enterprise policy for the Government. The Secretary of State for Education is also the Minister for Women and Equalities. The Under-Secretary of State for Women and Equalities at the Department for Education is also an Under-Secretary of State for Business, Innovation and Skills. They are all working to develop joined-up policies with the Government Equalities Office. We take it seriously as part of our commitment to social justice and to the long-term economic plan.
Research by the Enterprise Research Centre has shown the challenges that confront women entrepreneurs, but in many ways they are similar to those facing men.
The Minister has acknowledged the important work that the Government Equalities Office has been doing and the different Departments involved, but he has not been so clear on who is actually in charge of the policy area. Having many people involved is good, but who is in charge? Also, he has not mentioned what plans the Government might have for the Women’s Business Council and whether they think its role needs to be strengthened. Should it be looking at more diverse aspects of business? Should it be put on a statutory footing?
With eight days of this Parliament left, perhaps I could undertake to write formally to the hon. Lady to confirm the various initiatives that we have running. I assure her that if this Government are returned on 9 May, we will continue to keep our foot to the pedal and drive on this agenda. She would not expect me to commit now to what that might look like, given the uncertainties that we all face.
A number of colleagues mentioned access to finance, which is rightly regarded as a major obstacle preventing women from starting and growing a successful enterprise. It is worth pointing out that access to finance is an issue for all businesses, but although it is in many ways gender neutral, the truth is that women perceive higher financial barriers and the evidence shows that they are more likely to be discouraged, particularly by some forms of borrowing. Sources of finance for male and female-led businesses are similar, but studies show that women-owned businesses start with lower levels of overall capitalisation, use lower ratios of debt finance and are much less likely to use private equity or venture capital.
Encouraging women to start their own business is a key part of our long-term economic plan, which his why we have put in place a range of Government initiatives to support women. Through the GREAT website, we have brought together in one place all the relevant Government advice, guidance and support, but there is more to do. I am delighted that, this week, we in the Office for Life Sciences have redone our business support portal to make navigation easier for those outside the system. The Department for Business, Innovation and Skills has also launched a range of new measures, including a new web page specifically aimed at potential and existing female entrepreneurs.
The Government’s “Business is GREAT Britain” campaign has been highly effective at making small businesses aware of the range of support on offer to help them to grow. Specifically for women, we have committed additional funding to understand in communications terms the particular challenges that female entrepreneurs face, and we are making sure that existing activity is widely promoted among women. We have managed to match up experienced business women with those new to enterprise and invested £1.9 million in the “Get Mentoring” project—a number of colleagues mentioned mentoring. That project has recruited and trained more than 15,000 volunteer business mentors from the small business community, 42% of whom are women, I am delighted to say; that is more than 6,000 mentors trained specifically to support female entrepreneurs. Owing to the success of that project, the Government recently announced an extra £150,000 to host 12 “Meet a Mentor” roadshows throughout the UK for female entrepreneurs.
If I can just finish this section of my speech, I will happily give way.
We have invested in the women’s start-up project to provide opportunities for young women studying in the creative industries and the leisure and tourism sectors to start their own businesses. This pilot project, in partnership with Young Enterprise, will see the Government provide funding of up to £50,000 for teams of young women aged 19 to 24 studying at undergraduate level to set up and run their own businesses. We have also provided £2 million for small grants of up to £500 for those wishing to set up new child care businesses—help with child care is of course a major part of support, and I will say more about that in a moment. In the autumn statement, the Chancellor announced that that scheme would be extended until March 2016, with a further £2 million made available for next year.
As a number of colleagues have mentioned, we have provided a £1 million women and broadband challenge fund to help women to move their business online and take advantage of superfast broadband. Sixteen local authorities have been awarded a grant to support actions to encourage women’s enterprise in areas where superfast broadband is being deployed. I want to touch on the particular challenge faced by women entrepreneurs in rural areas such as my own.
I will just finish my point, then I will give way.
The Government are actively addressing a number of additional barriers for women in rural areas. We have provided £1.6 million to support women’s start-ups in rural areas, including improved access to transport links, virtual assistants for those in the most remote areas, online help, and local business support through mentoring, skills training and networking.
Before the Minister moves on from discussing Government support to women’s business, I want to press him on the Aspire fund—I hope that he has just received a note on it from his officials. He mentioned a number of different pots of money that are being given out to support women in business in various ways—for example, the broadband challenge. The Aspire fund was set up with £12 million to support high-growth women-owned ventures, but six years on, only £4.7 million has been invested. Will he say more about why that is the case and what the Government are doing to reduce the gap? If that money is there to support women’s business, surely we should ensure that it gets to women in business.
With her typical prescience, the hon. Lady anticipates the next paragraph of my speech. We recognise that the sector needs particular support, which is why we are so keen on the Aspire fund, which makes equity investments of between £100,000 and £1 million on a co-investment basis and is designed to help female-led businesses that aim to grow. The fund invested £1.3 million and supported £5.5 million of investment in 2013-14, and it has a total of £12.5 million to invest.
It is worth remembering that the fund was not intended to fund a large number of businesses; it is there as a beacon project to support women-only businesses and catalyse the sector. I am delighted that we have also made additional investment available to businesses led by women, as well as those led by men, through the £100 million business angel co-investment fund. We must not forget that although we are catalysing and driving women-only entrepreneurs, the whole range of business support mechanisms we have put in place—including the seed investment enterprise scheme and the expanded enterprise investment scheme—are all available to women entrepreneurs.
I just want to finish this point about funding.
Without the right funding, it would be hard for anyone to realise the potential of their ideas. The Aspire fund is one of a much larger range of measures. Women are also benefiting from the full range of start-up loans and the new enterprise allowance. More than 25,000 loans worth more than £160 million have now been made, with 37% going to women. The 25,000th loan was given to a female entrepreneur.
To help more parents to start their own business, from autumn 2015 tax-free child care will be available to nearly 2 million households to help with the cost of child care. That will enable more parents to go to work and, unlike the current scheme—employer-supported child care—it will be available to self-employed parents.
There is a £7 million gap between the £12 million that has been made available for women’s businesses and the money that has actually been drawn down. I take the Minister’s point, and I am not suggesting that that is the only funding available for women entrepreneurs, but compared with other Government-led schemes, there is a substantial disparity. Why does he think that is? Why has the Aspire fund not been able to lend at the same rate as the other available start-up funds? Will he commit the Government to monitoring across the piece the gender of those to whom they are lending through start-up schemes? The Government have not always monitored that, but they must do so to truly understand what we might have to change about finance for women to ensure that they all get the support that they need.
It is important to realise that we do not want the investment funds that take equity stakes simply to shovel the money out of the door irrespective of the quality of the bids. The decisions have to be based on proper investment criteria, and it is not for me or the hon. Lady to second-guess such judgments. I am pleased to see that after an initial period during which the rate of investment was slower, it has picked up. We are actively monitoring and supporting the fund, and our ambition is for it to be spent and invested, but it is important that we send a signal that the money is going into high-quality business propositions.
As we have all acknowledged this morning, there is a challenge in trying to observe the wider cultural point made by my hon. Friend the Member for Cambridge (Dr Huppert). He said that we must promote world-class, aspirational, high start-up businesses that are capable of receiving that sort of venture capital. It is not for us to signal that the money should be pumped out of the door irrespective of the quality of the bids. It is for the fund manager to ensure that they are picking the right investments.
I have tried to be generous in giving way, but time is running out, so I want to complete my remarks. For all the reasons I have outlined, and because we agreed that we must do more, in April 2014, my right hon. Friend the Secretary of State appointed my hon. Friend the Member for Solihull (Lorely Burt) to the role of women in enterprise champion, to promote the support available to women starting a business. In February, she presented her report on how the Government could boost support for female entrepreneurs, and we agree with much of the thinking and analysis it contains. I cannot be expected to commit the Government to agree with every single one of the recommendations, but we are actively looking at them and working on an implementation plan.
I want to pick up on some of the comments. My hon. Friend the Member for Cambridge focused in particular on science and start-up companies. I join him in paying tribute to the people in the high-tech and life sciences sector, which we both know well from Cambridge, and to entrepreneurs such as Julie Deane of the Cambridge Satchel Company. He made a number of interesting points about cultural attitudes and the need to ensure that, in what can sometimes be the quite macho world of finance, the quality of women entrepreneurs and of women in science is properly recognised.
My hon. Friend also talked about the importance of getting schools better connected to businesses. We can all do something about that in our own constituencies. Tomorrow night, the Norfolk Way is launching our first innovation awards for Norfolk, linking up science teachers and students in schools with local businesses in the area. He made an important point about 8% of venture capital funding but 41% of crowdfunding going to women-led businesses. That sends a signal about the power of some of the new financing mechanisms to support women’s businesses. Although the Enterprise Research Centre has shown that there are no specific obstacles to access to finance for women, strong perceptions have a powerful effect, and that is something we need to monitor.
My hon. Friend made a particular point about STEM. Since 2009-10 the number of women starting engineering in manufacturing apprenticeships has increased threefold, which is a real success for the coalition’s apprenticeships policy in that we are getting more and more women in the STEM subjects. More action is necessary, but with the apprenticeship ambassadors STEMNET programme we are making progress. The Your Life “Call to Action”, part of the campaign launched by the Chancellor and the Secretary of State for Environment, Food and Rural Affairs, has brought together employers, educators and the professions to make concrete pledges to increase the number of women in engineering and technology. I am delighted that more than 200,000 organisations have now pledged to create in excess of 2,000 entry-level positions, including apprenticeships, graduate jobs and paid work experience posts, as well as action to support their female work force.
The hon. Member for Feltham and Heston (Seema Malhotra) talked about mentors and I could not remember a name. I hope that the Minister will join me in congratulating Roma Agrawal, who worked on the Shard and has a website, romatheengineer.com, which promotes females going into engineering.
I absolutely join my hon. Friend in paying tribute to another beacon project that is sending out such a powerful signal to girls and women about opportunities available to them. I am delighted, too, that we allocated a further £20 million in the engineering skills fund to help employers to tackle skills shortages in engineering, including to develop women engineers.
Finally, my hon. Friend made a point about enterprise education. I am delighted to confirm that we are working actively with schools, colleges and higher education institutions to encourage and promote entrepreneurial attitudes and skills training, as well as providing mentors and role models and improving access to finance support.
I want to deal with the questions about child care and women on boards. A number of colleagues asked about child care support. The Government have increased the number of funded hours of free child care from 12.5 to 15 hours a week for all three and four-year-olds, saving families an additional £425 a year per child. Since September 2014, we have funded an additional 15 hours a week of free child care for the 40% most disadvantaged two-year-olds, saving families £2,500 a year per child. We have also increased child tax credit well above inflation to £2,780 a year, which is £480 more a year than at the beginning of the Parliament. All families under universal credit will be able to receive 80% support for child care costs, which is up from 70% under the existing working tax credit system. The introduction of tax-free child care could also save a working family up to £2,000 a year per child. In addition, we have committed an extra £50 million to introduce a new early years pupil premium in 2015-16 to support the most disadvantaged three and four-year-olds to access Government-funded early education. That is important if we are to support our entrepreneurs and innovators in all walks of society and to ensure that entrepreneurship is not the preserve of the well-off.
Women on boards is an important subject. A lot of our entrepreneurial companies do well and go on to become substantial, significant companies quoted on the stock market. We are ensuring that, at that point, women continue in leadership roles. Following Lord Davies’s recommendations in the 2011 “Women on boards” report, the Government are committed to achieving the target he set for the end of 2015 of 25% of FTSE 100 boards being women. We also want to increase the number of women on FTSE 250 boards. The graph that I have in my hands shows a line slowly climbing from 2004 to 2011, but then turning sharply upwards, going from 12.5% of women on the boards of FTSE 100 companies to 20.7% at the end of 2014. We are making a real impact and we must continue to do so. I am delighted that now 22.8% of FTSE 100 board members are women and that women now account for 28% of FTSE 100 non-executive directorships and 8.5% of FTSE 100 executive directorships. There is much more to do, but we are making real progress.
Does the Minister share the view of his colleague, the Minister for Business and Enterprise, that it is unacceptable that boards are only appointing women to non-executive positions and that what we need therefore is a target not only for women on boards, but for women in decision-making positions? Also, will the Minister answer the questions about the Women’s Business Council and about the supply chain? It would be incredibly helpful to hear his response on those issues as well.
I do share the ambition and desire of my fellow BIS Minister, my right hon. Friend the Member for West Suffolk (Matthew Hancock), to see a continuing increase in the rate of women being appointed to the boards of our top companies. The hon. Lady is right to highlight that we do not want women only to be in non-executive roles; they must be in executive roles as well. That is why I was saying that we are very much focused on that. We are pleased with the progress, but we need to go further—not, I hasten to add, because of a politically correct desire to hit some quota, but because women are talented and represent more than half of our work force. By not giving women fair representation in the leadership positions of our great companies, we deny those companies their talents. We are being hard-headed and not only concerned with social justice. It is in the interests of the country in every way. I am glad that we agree on that.
In closing, I want to return to the point with which I started. Many of the arguments used in the Chamber today relate to the economic contribution of women in entrepreneurship and start-up businesses and to the need to unleash the talents of women, because that is so important to our economy, but I want to highlight the importance of a small business and entrepreneurial economy to the wider stock of social capital and the ties that bind us. I am absolutely certain that if we are to rebalance our economy in the broadest sense, we need to create one in which small business not only contributes to economic success, but helps to bring communities together. Give me a deal between two small companies any day of the week and I will show people a deal that includes not only an economic deliverable, but a contribution to social capital and to building trust between communities. In many of our small towns, neighbourhoods, villages and inner-city communities, small businesses working together produce and deliver so much more than just economic growth. It is vital that we build women into that network as well.
For those reasons, I am delighted that, while there is not a shred of complacency in the Government, we are making real progress. We now have 1.45 million women enjoying the freedoms and flexibilities of self-employment, which is 42,000 more than in the previous quarter and 281,000 more than in 2010. We also have 900,000 SMEs run by women, more than at any time in our history. I am not complacent, but the Government are making progress.
Before the Minister closes, I wanted his response to two specific questions about the future of the Women’s Business Council and the supply chain. His own Government adviser on women-led businesses has suggested that the Government should monitor women in the procurement supply chain. Will he commit the Government to that, yes or no?
I have taken a lot of interventions and questions, but I will happily get back to the hon. Lady in detail. She made an interesting point about procurement. Through the work of the Cabinet Office, we are driving hard to ensure that we use every procurement power to support innovation throughout the economy. That is an important part of it and I will happily come back to her on it later.
The 900,000 SMEs run by women in our economy, the highest number in history, suggests that we are making real progress. I am not complacent for a moment, but we are on the right track.
AEA Technology Pension Scheme
I am grateful to you, Mr Robertson, and to Mr Speaker for giving me the opportunity to raise the matter of the AEA Technology pension scheme, following the company’s pre-pack administration in 2012. I am also grateful to the Minister, my parliamentary neighbour, for being here to respond to the debate, and to my right hon. Friend the Member for Saffron Walden (Sir Alan Haselhurst) and my hon. Friends the Members for Newbury (Richard Benyon), for Reading West (Alok Sharma) and for Oxford West and Abingdon (Nicola Blackwood) for being here to support me. I give special thanks to the Minister for Culture and the Digital Economy, my hon. Friend the Member for Wantage (Mr Vaizey), and to his staff. He is the constituency Member concerned with the matter, and he and his staff have been very active on it, as have lots of other right hon. and hon. Members.
I have received continuing representations from my constituent Dr Ken Nicholson, who has been affected by the issue. I know that constituents of other Members have also been affected. I will start with some background information for context. The AEA Technology pension scheme is a defined-benefit final salary scheme, set up when AEA Technology, which was previously the commercial arm of the United Kingdom Atomic Energy Authority, was floated on the stock exchange in September 1996. AEA Technology had become a Government-owned company that April, although staff remained members of the UKAEA pension scheme until flotation.
The Atomic Energy Authority Act 1995 detailed the conditions for the privatisation of AEA Technology and included specific information regarding the pension arrangements for transferring staff. A schedule to the Act stated that benefits from the daughter scheme should be “no less favourable” than those that would have arisen from the UKAEA scheme as it was at the time. There was a duty to ensure the arrangements for the new scheme satisfied the demands specified in the Act, something the then Energy Minister, Tim Eggar, stressed on Second Reading of the Bill in March 1995.
My hon. Friend has come quickly to the nub of the matter. People made the transfer because they believed that the terms would be no less favourable than those they were enjoying before they did so. Does he agree that the key question is, who will compensate those who have lost out? I know that it happened many years ago under a previous Minister, but perhaps the Minister will address that point as well when he makes his remarks.
My hon. Friend has made his point cogently. I will return to the matter of compensation later in my speech.
Once part of the new scheme, members were encouraged to transfer all accrued pension service from the UKAEA scheme, by a leaflet presented as impartial advice from the Government Actuary’s Department; it has recently been found that the leaflet was changed several times at the request of the UKAEA to remove references to risks involved in the transfer. Scheme members were assured that their pension would be safe. As both schemes were based on final salary, the decision by scheme members on whether to transfer service to the new scheme or to freeze it in the UKAEA scheme was based on a judgment of what would happen to their own salary in future years. They could not make the decision based on whether the new scheme contained more risk, since they had not been warned of any.
My hon. Friend makes a really potent point, which I will come on to later in my speech.
People had not been warned of the risks by the official leaflets that they received. The AEA Technology pension scheme received an initial injection of cash from its mother scheme, the UKAEA scheme, based on the accrued service and pension entitlements of the transferred members. The mother scheme was operating with a notional surplus at the time, but none of that surplus was passed to the new scheme, giving the Treasury an increased windfall. Since the AEA Technology pension scheme ran into deficit because of changes in actuarial valuations, it has now become apparent that insufficient funds were transferred into it when it was set up. Moreover, no written agreements appear to have been made to cover such an eventuality. In other words, either the Government have a continuing moral, and possibly legal, duty to those transferred members or they cannot have fully discharged their responsibility under the Atomic Energy Authority Act.
The Department for Work and Pensions has suggested the requirements of the Act may have been fulfilled because when it was launched the benefits from the new scheme matched those of the mother scheme. However, none of the transferring scheme members—my hon. Friend has made the very good point that they were extremely bright and able people—were eligible to draw benefits at the time, because none of them were retired, so the DWP’s claim cannot be true. The Act’s intention must have been that the new pension scheme would not change in future years if the UKAEA one did not, meaning the benefits were secure.
It is now proposed that the AEA Technology pension scheme be transferred to the Pension Protection Fund, where index-linking of benefits would be removed and replaced by an inflationary allowance, capped at a maximum of 2.5% for service from April 1997 onwards. That covers almost all post-privatisation service. It would further mean that all index-linking would be removed from service prior to that date—that is, from all service transferred from the Government sector, which the scheme members were told was secure. In addition, all members below retirement age would suffer a further 10% drop in their pension. The overall effect is a greatly diminished pension that is far less than the benefits that would have been due from the UKAEA scheme. It would not be equivalent, as was specified in the Atomic Energy Authority Act.
My hon. Friend is making a good point. The key point to which we want the Minister to respond is that, as a public sector pension, the AEA Technology scheme had full protection linked to the retail price index. That has now been lost, on the basis of wrong advice that was given at the time.
As I will explain in a minute, it was partly wrong advice at the time and partly the fact that the subsequent company went into a pre-pack.
As I was saying, the proposed transfer to the PPF means that the scheme would not be equivalent to the UKAEA scheme, as was specified in the 1995 Act. I would be grateful to hear the Minister’s views on whether the AEA Technology pension scheme should present a special case because it was formed as a result of privatisation, as my hon. Friend the Member for Newbury said. Additionally, does the Minister believe that the Government should have a duty of care to those staff who were transferred into the AEA Technology scheme? Do the Government have a moral and legal duty to act to protect the pension scheme members against loss, given the assurances that, as my hon. Friend said, were made to staff as part of the privatisation process both in Parliament and in the printed materials provided to scheme members by an arm of the Government at the time?
I understand that in 2010 AEA Technology made an unsuccessful acquisition of the US firm Eastern Research Group by issuing a large number of shares. Problems arose with ERG the following year because of late payments and delays in the US Government’s awarding of contracts. AEA Technology issued a statement in November 2011, which played down the prospects of the UK-based part of the company and highlighted ERG’s problems. That drove the company share price down to virtually zero. Notwithstanding that, the long-term prospects for ERG appeared good, as it had recently won a £100 million contract, and AEA Technology’s successful UK-based business, which had originated from the privatisation exercise, was profitable and actively recruiting at the time.
Given its financial situation and low share price, AEA Technology ran into cash-flow problems. Therefore, in November 2011, it began negotiating with various parties, including its bank, the scheme trustees, the PPF and the Pensions Regulator. The aim of the negotiations was to improve its financial position, and the plan that was agreed involved arranging a pre-pack administration to allow it to default on its pensions obligations and to start afresh under new, improved trading conditions—AEA’s original pensioners were about to suffer a serious double whammy.
The company’s share price was driven down so low—to about 0.05p, following a peak of almost £10 soon after flotation—that the company’s market capitalisation was less than £l million, which was less than the annual profit from the UK-based business alone. Given the low share price, investors would face no great financial loss from entering administration. The idea was for the PPF to take over the pension scheme and its assets. However, the PPF has fixed rates of compensation and, in particular, limitations on its rates for inflationary allowances. The net effect on scheme members, therefore, would be to reduce their pension pots to less than half of what they might originally have expected. That drop is greater than that explained by the scheme deficit. To add insult to injury, the scheme is contracted out, which means that its members will not be eligible for an additional state pension.
The pension scheme trustees initiated the pre-pack administration of AEA Technology by electing to wind up the pension scheme and to invoice AEA Technology for the full buy-out costs. Such action would be enough to make almost any company insolvent. The argument for entering a pre-pack administration was that it would maximise—that is pretty unrealistic—the company’s value, which would, in turn, maximise the scheme’s value for its members. Of course, that later turned out to be totally false. The money put into the scheme from the sale of the company was negligible by comparison with the losses caused by winding the scheme up. Scheme members could never have benefited from that; the beneficiaries could only ever have been the bank and the PPF.
AEA Technology was profitable and expanding, and it had a healthy order book, when it elected to enter pre-pack administration. The surviving parts of the company have continued to prosper. An air of secrecy shrouds the pre-pack negotiations, with everyone stating they are someone else’s responsibility or that information is commercially sensitive. Who it is who is commercially vulnerable is a big secret. That has also been the disingenuous response of the relevant Departments, while the various ombudsmen have thus far refused to get involved. What is the purpose of an ombudsman if, the moment they encounter a really difficult case, they fold and refuse to investigate?
Pre-pack administrations were set up with the intention of being for the benefit of creditors. The PPF was set up as a safety net for company pension schemes that run into trouble. The Pensions Regulator has a duty to protect pension scheme members’ best interests, as have the trustees. Yet in the case of AEA Technology, it appears that all those parties got together to help the company financially, at the expense, yet again, of those they were supposed to protect—the pension scheme members.
The AEA Technology case is special because the company was formed through privatisation. Many of its pension scheme members are ex-Government employees, who are extremely well qualified and extremely intelligent, and the Government have a continuing duty of care towards them. For that reason alone, the pre-pack administration needs careful investigation.
The case has highlighted other important issues. For example, there is the question whether pre-pack administrations are being abused. Additionally, the implications of defaulting on pensions for commercial reasons need to be understood and controlled if the Government are to be successful in promoting saving for retirement and in introducing a unified, simplified pension system into which transfers are the norm.
Sadly, in this case, it is all too clear that a large number of very bright people were misled by the information issued by a Department. Some of the information—the drafting was heavily influenced to minimise any reference to risk—may also amount to a misleading prospectus, and it needs to be thoroughly examined by the Government regulator.
I end by saying that the pre-pack administration of the AEA Technology pension fund and the information on which members transferred their entitlements need proper and thorough investigation, and scheme members need compensating accordingly. I look forward very much to what my right hon. Friend the Minister has to say, and I thank him for listening.
I congratulate my constituency neighbour, my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown), on securing this important debate. As he knows, I have taken an interest in the issue, and I met his constituent Dr Nicholson with him in 2013. I have also had a number of meetings with hon. Members and scheme members.
It is important to say, for what it is worth, that I hugely sympathise with anybody who built up pension rights, was expecting a certain pension and then did not get it. Nothing I say subsequently about the Government’s position takes away from the fact that we are dealing with a very unsatisfactory situation that all of us would want to avoid.
Let me go through the points my hon. Friend raised and respond to them as best as I can. The first is the issue of what the legislation meant when it said that the value of accruals in the new scheme had to be “no less favourable”. The scheme people came out of was essentially a civil service-type scheme. That meant the new scheme had to enable people to go on building up benefits that were no less favourable; it did not mean that what was then a private company had its pension deficit, for example, underwritten by the taxpayer indefinitely—it could not have meant that.
Let us suppose that the trustees of a hypothetical privatised new scheme invested recklessly and generated a huge deficit, resulting in insolvency. Would the taxpayer be responsible for the trustees’ actions? Similarly, if investment returns went badly for that private company or other private companies, would the taxpayer be indefinitely on the hook for any deficit? Clearly, that is not what the law meant, and it is not our understanding of what it meant; indeed, the more one thinks about it, the more one sees that it could not have been what the law meant. The law was quite clear that people transferring across had to build up benefits on the same—no less favourable—basis as under the scheme they had left. That was the scheme that was set up, which complied with the legislation.
I understand, and I agree with my right hon. Friend’s point. My point was that, at the time of transfer, the scheme was in surplus. Subsequently, the actuarial valuation proved that insufficient money had been transferred from the mother scheme to the daughter scheme. If insufficient money was transferred, the new scheme was never going to perform to the level the pensioners expected.
Let me address that point. The first thing to say is that the trustees of the scheme the money went into agreed the transfer values. They could have said, “You’re not putting in enough money to reflect the benefits we are going to have to pay out,” but they signed off the transfer values at the time.
The notion of a surplus is strange, because this is an unfunded pension scheme until the point of transfer. It is just a liability on the Government’s books for decades to come. A flow of contributions has come in, and those are given a notional investment return in the Government books. The concept of a surplus is not what this means in plain language; it is not like the Government were sitting on a pot of money that they hid. Government accounting for public service unfunded pension schemes is very different from that for funded pension schemes, where a surplus has a real meaning. It sounds as though what we are talking about means something when it does not. This is about the way the Government accounts for public service unfunded schemes; it is not that money was held back.
A valuation was done on quite a prudent basis. If the money transferred across had been invested in quite a low-risk way, it would, at the point of transfer—that is the crucial point—have been enough to pay the liabilities that were transferred across. However, the world changed subsequently for this scheme and every other scheme: people started living longer, investment returns over time started falling and, as my hon. Friend said, accounting practices changed. All sorts of things changed, which meant that all sorts of private sector company pension schemes began to face bigger deficits. The AEA Technology pension scheme was not different or unique in that respect. The trustees accepted the transfer value, which was fair for the liabilities that were transferred across, even on a quite prudent basis.
I wonder if I may make more progress, to be fair to my hon. Friend the Member for The Cotswolds, as I want to respond on a few points.
The money went across; the firm was then private. Clearly, the business went on trading for 15 years or so. An issue arises about whether it was a prosperous, expanding firm where something funny went on, or on the brink of insolvency. I want to clarify what went on; my hon. Friend referred to it in part. In November 2011, the company issued a trading statement saying its financial position was deteriorating, and it was discussing the situation with its banks. In April 2012, AEA Technology’s latest forecast indicated that the company would be insolvent on a cash-flow basis by June 2012.
It can be simultaneously true that a company is recruiting more people and that it has terrible cash-flow problems. If the point is reached where it cannot meet its liabilities, it becomes insolvent. To give a sense of scale, the deficit in the pension fund as of 2011, on a standard basis, was £315 million, and the company could not afford to pay £6 million towards it. That is how bad things had got. So on the notion that somehow that £315 million deficit, which was £450 million on a buy-out basis, was going to be cleared, that was not going to happen.
Pre-pack administration is controversial and difficult and happens only when the options are insolvency with jobs lost and the pension fund going to the PPF, or insolvency with jobs saved and the pension fund going to the PPF. That was the choice. In fact, because of the pre-pack, hundreds of jobs were saved. To make a comparison with a straight insolvency, I am advised that the scheme would have got about £1 million with a routine insolvency, but the pre-pack enabled it to get between £6 million and £8 million.
My hon. Friend is quite right: frankly, when a scheme is £300 million in deficit that will not make any difference, because it is going to end up in the PPF anyway, so the benefit is to the PPF and not the members. However, the Government do not encourage struggling firms to shovel their pension fund deficits off to the PPF and carry on trading. It is allowed only where insolvency is inevitable. Our judgment was that that was the state of the company at the time, and the goal was to save some jobs, because the scheme was going to end up in the PPF anyway.
My hon. Friend asked about PPF benefits, and he is right: it is a compensation scheme. It is not a pension scheme that replaces and mirrors the benefits that were to be provided in the scheme. The reason for that is that the money for the PPF comes from other pension schemes, so any improvement in the benefits under the PPF is a bigger levy on employers who run other pension schemes. We should bear in mind that it did not exist much more than a decade ago. When it was set up, it was decided that it would offer broad compensation—100% above pension age, and 90% below, and indexation post-1997. That is the statutory requirement; schemes must index post-1997, and not pre-1997, and that is why the PPF does so.
My hon. Friend asked whether, because the firm was privatised, it should be made a special case. Of course I sympathise, but on the other hand vast numbers of workers now work for private companies that were previously nationalised. If AEA Technology were to be declared a special case, the pension funds of all the people who used to work for BT or British Airways and all the privatised companies would have to have special arrangements, too, with huge cost implications.
The question about the advice note given at the time is important. I have read the GAD note, and its introduction says, at 1.1.3:
“The note is not intended to suggest that any one course of action is better than any other. This would depend on individual circumstances, and if you are unsure of the most suitable course of action you should seek Independent Financial Advice which would take into account your particular circumstances.”
That was the point of the note. People could leave the money where it was, transfer it across to the AEA scheme or take a personal pension transfer. The note was explicit from the start that it was not designed to lead people down a particular route. In a sense, from the Government’s point of view it did not matter. The Government were going to transfer across the cash value of the rights built up, so they did not care whether people transferred across. There would have been no reason for GAD to write a note designed to lead people to a particular outcome. It would cost the Government the same either way.
Does my right hon. Friend understand that the frustration of the pensioners and those of us trying to represent them is compounded by the fact that there seem to be different players in the game, including another Department? We are grateful to him for responding to the debate, but perhaps he could nudge the Department for Business, Innovation and Skills to reply to questions I tabled to try to get further answers for my constituents.
I am very happy to ask colleagues at the Department to respond to my right hon. Friend’s questions. Obviously, as he said, the issue of PPF is a DWP responsibility, but insolvency policy—pre-packs and so on—is a BIS responsibility, and of course he should get prompt responses to his questions. If my hon. Friend the Member for Reading West still wants to intervene I am happy to give way.
I wanted to make the point that people affected by the scheme will be listening to the debate, and the bottom line for them is that what the Minister is saying—perhaps he will correct me if I am wrong—is that no compensation or redress will be forthcoming from the Government.
Clearly, the Government have set up the Pension Protection Fund. As I have said, more than about 10 years ago, people in the situation we are talking about might have received a tiny fraction of the pension they had been going to get. In the present case, the base calculation for those over scheme pension age is 100%. I take the point about indexation, but it is 100%. It is 90% for those under scheme pension age. That is obviously still a significant part of their pension rights. Clearly, the reduction in indexation is important. I would not play that down.
The other thing to mention—my hon. Friend the Member for The Cotswolds did not refer to it—is that at the moment scheme benefits are capped. There is implicitly a salary cap—a cap on the amount of money that someone can get through the scheme. We legislated during this Parliament, with the support of my right hon. and hon. Friends, for that cap to be raised for long-serving employees. One reason I was keen to do that is if a relatively large pension through the PPF is capped, it may not be because the person in question was a ridiculously high earner; it could simply be because of very long service with that employer. I believe that that is so for many of my hon. Friend’s constituents.
I felt it was unjust that the cap applied quite as brutally as it does in those cases, so we are now working on the secondary legislation necessary to get the cap lifted. It will rise by 3% per year for each year above 20 years of service, so long-serving employees will get a higher cap. We are working on the measure, and if we can get it done this year, we will. I suspect that realistically we are probably looking at this time next year. However, I do not have a pot of money to offer beyond that. Clearly, the PPF is there for all employees of private sector companies.
I am grateful to my right hon. Friend for that announcement, which I think affected scheme members will warmly welcome. I mentioned one other matter: being contracted out from the state pension scheme. Given what has happened to the poor people involved, is there any change that can be made, so that they could be considered contracted into the state pension scheme, and therefore receive additional state pension?
The challenge is that the flip side of being contracted out is that both the employee and the employer paid a reduced rate of national insurance, so lower state benefits accrue, and the scheme essentially replaces part of the state benefit, up to a certain amount, often called a guaranteed minimum pension. The employee benefits from low contributions and has part of the state pension replaced by the scheme pension. I hesitate to say this definitively, but the vast majority of scheme members will certainly get at least the guaranteed minimum pension, I would expect, through the equivalent—through the PPF, now. I cannot swear that that will be true in every case. It will be very difficult to unwind all of that and to go back and say, “We offset your reduced NI, so we work out how much you and the employer saved by reduced NI; we take account of that and give you a bigger state pension and we net off the saving.” That would be a very complex calculation. I think there are occasions when this sort of thing gets unwound, but they are exceptional, and I would not want to raise my hon. Friend’s hopes.
I want to reiterate my sympathy. I believe that the Government transferred a fair amount of money across at the time and fulfilled their legal obligations to provide matching—at least as favourable—benefits. Obviously, we all regret where things ended up. I do not believe that the company was pressured into pre-pack administration. I believe that at the time that was done to save jobs, which it did. I am pleased that PPF exists to provide at least a safety net, and I hope that my hon. Friends will welcome the fact that we have done what we could to improve it during this Parliament. That will benefit a significant number of people who worked for AEA Technology and unfortunately will not get the full pension that they expected.
[Mr Mike Weir in the Chair]
It is a pleasure to serve under your chairmanship, Mr Weir. I thank hon. Members for taking the time to discuss this matter with me and to give their points of view. I hope that this debate will be part of a larger one. It is about time we had that.
Forty-five years ago, Barbara Castle’s Equal Pay Act 1970 inspired a generation of young women and girls, which included me. I was a member of St Mary’s church choir in Guildford the year the Act was passed and I was galvanised into action when I heard that the boys in a church choir in the same parish were getting paid twice as much as we were. With my friends, Bryony and Lesley, I wrote to the rector to complain about that great injustice. That did not go well. He showed what he thought of our protest in his next school assembly when he gave us an honourable mention in his sermon on avarice and greed. While I was inspired by that landmark law, I never imagined that I would be here today, talking about the need for a new one. However, like many other products of the 1970s—Status Quo, mood rings and cassette tapes—the Equal Pay Act has not really stood the test of time.
Thanks to the hit film and west end musical “Made in Dagenham”, many who were not around at the time are now familiar with the circumstances that helped the Equal Pay Act into being. In 1968, women sewing-machinists at Ford’s Dagenham plant walked out after their jobs were classified as less skilled, allowing managers to pay them 15% less than men doing comparable work. The women, who made car seat covers, managed to bring about a complete halt in the plant’s car production during their three-week strike. However, much more than that, they were the catalyst for a series of events that included a 1,000-strong rally for equal pay in Trafalgar square the following year, which culminated in the passage of legislation that, for the first time, explicitly outlawed the unequal treatment of men and women with regard to pay and terms and conditions of their employment.
On Second Reading, Barbara Castle rightly hailed the Equal Pay Act as an
“historic advance in the struggle against discrimination in our society”.—[Official Report, 9 February 1970; Vol. 795, c. 914.]
It certainly was an advance. Today, the wage gap between men and women is a quarter of the size it was at that time. I am afraid, however, that that was not a perfect solution, as Barbara acknowledged at the time. As anyone who was around then will know—as will those who have seen “Made in Dagenham”—the Equal Pay Act was a product of a time when, all too often, pay discrimination was blatant. Many women knew that they were being paid less than their male colleagues for no reason other than being women. The Act was crafted to fit the challenges the situation presented and the time of its passage. As such, its approach was essentially reactive. For example, a woman had to find a comparator: a male colleague who was paid more for similar work. She then had to marshal evidence to present to a tribunal. If successful, she would be compensated for loss of wages and achieve equal pay for the future.
That sounds like an entirely reasonable and simple solution, and at the time it was, but a law written to give women the tools to fight blatant discrimination was, perhaps inevitably and understandably, a blunt instrument. For a start, compensation paid to an individual was limited to that individual. At that stage there was no understanding of the importance of looking also at the impact on others affected in the same way and there was no requirement for offending employers to correct practices that led to such discrimination in the first place. Therefore, unless a claimant joined in an action at the outset, a sister colleague working in the same plant, doing the same work, would have to relitigate the matter from scratch even if her colleague had made a successful claim in identical circumstances. It has never been easy to take an employer to a tribunal, even before the near disappearance of legal aid for employment law cases and the introduction of tribunal fees that have led to an immediate 79% drop in the number of equal pay claims and that have been called—I think rightly—a tax on justice. However, there is more to it than that.
A fundamental problem with the Equal Pay Act is that its authors could not have predicted the extent to which the rise of fractured employment practices and insecure working have changed the context in which the law operates today. As Karon Monaghan, QC, a leading employment law specialist, has pointed out, the requirement that a male comparator be employed by the same employer, or an associated employer at the same establishment, causes
“very significant disadvantage to women employed in public sector services that have been contracted out to private contractors”.
Similarly, the increased fragmentation of pay setting in large organisations has undermined women’s ability to bring a claim under the Act. Robertson v. the Department for Environment, Food and Rural Affairs is a case in point. Civil servants employed by DEFRA sought to bring a claim using a male comparator at the Department for Transport. The Court of Appeal held that, although civil servants were all employees of the same Government, the claim could not be directed at a single source because pay was devolved for individual Departments to determine.
Many other loopholes have helped mire the legislation in inefficiency. Perhaps the most ridiculous is that the law explicitly states that a comparator must be someone employed at the time. Therefore, if a woman leaves a job and a man takes it and gets paid much more, that cannot be used as a comparator. Frankly, that is ridiculous and flies in the face of common sense. That is exactly the sort of thing that should be classed as discrimination and that any Equal Pay Act ought to deal with. I should clarify that I am not by any means blaming the authors of the 1970 Act for flaws that have bogged the legislation down in the intervening years. They were pioneers in the fight for equality and I applaud them. My point is simply that they were addressing the circumstances of their time and what has become increasingly clear to me and others who have studied this issue is that if we truly want to eradicate unequal pay once and for all, we need to follow their example and craft a new law that is fit to meet the new challenges of our time.
I congratulate my hon. Friend on securing this important debate. When the Equality Act 2006 was passed, it was believed that voluntary pay audits would help to solve the problem. They have not, but she is illustrating how they are not the answer in any case. Does she agree that we need to take a whole new look at the law on equal pay?
I agree completely. While I am pleased that, at last, the Government have now said that they will introduce that section of the Act, we have wasted a large amount of time on arguing over this matter. That minimal change could and should have been implemented much earlier than it will be. However, progress is progress and that should be recognised. I think that leaving it to the good will of companies to do audits led to only five of them doing them. Clearly that is not anything like sufficient.
To go back to Second Reading of the 1970 Act, Barbara Castle was prescient in asking, “What, then, of evasion?” She knew that there were circumstances—foreseen or unforeseen—that could allow the spirit of the law to be undermined. At the time, she said:
“I have no doubt that some employers will try it on…undoubtedly, pockets of discrimination will remain—unless women organise to put a stop to it.”—[Official Report, 9 February 1970; Vol. 795, c. 928.]
A number of women have followed on from Barbara Castle. Her fighting spirit has lived on through the generations of Labour women who succeeded her and in such a debate it is only right that I recognise them. My right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), who joined Parliament when it was 97% male in 1982, has led the way in fighting for many changes that we take for granted today, such as a national minimum wage; longer maternity leave; higher maternity pay; the Equality Act, as has been referred to; and measures to promote pay transparency, which are a vital tool in tackling pay inequality.
Transparency must be the bedrock of a renewed effort to close the wage gap. As my hon. Friend the Member for Rotherham (Sarah Champion) said when making the case for her Equal Pay (Transparency) Bill:
“Pay transparency would push companies to focus on why the pay gap still exists”.
Further, she said that it
“places the responsibility on employers to be actively conscious of the law on equal pay, and to have policies to address the gap.”—[Official Report, 16 December 2014; Vol. 589, c. 1301.]
She is absolutely right. Perhaps it is a call to action.
I apologise for being late, and I am really grateful that the hon. Lady has secured this debate, because we need to challenge this situation all the time. Was my hon. Friend surprised, as I was, by just how big the pay gap is? Before researching it, I expected it to be 2% or 3%, but I find the fact that it is nearly 20% genuinely shocking.
Perhaps I am not as much of an optimist as my hon. Friend. I was not at all surprised. Although the landscape is more complex, the effect is essentially the same: women and women’s work are still systematically undervalued in our country, and we have to be on our toes and be prepared to be imaginative and think laterally to tackle that. We have learnt, as was highlighted in the debate on my hon. Friend’s Bill, that we simply cannot leave it to good will; we need to be radical and brave and be prepared to tackle the situation head on. The change that the Government have agreed to, pushed for by my hon. Friend and many others, is a good start, but we need to go further. As I said, it is a shame that Ministers have dragged their feet, but I will not go any further than that. There is a lot that I could say, but I will be more generous.
As my noble Friend Baroness Thornton pointed out last week, of the 7,000 companies employing more than 250 people, just 270 have signed up to Think, Act, Report, but of those—this is what matters—only five have opted to publish data on their employees’ pay. It is clear, as she put it, that
“a voluntary approach on its own will not deliver the transparency needed to achieve a change in companies’ behaviour”.—[Official Report, House of Lords, 11 March 2015; Vol. 760, c. 668.]
It will seem like an obvious point to make, but when only five out of 7,000 companies—that is 0.07%—opt for transparency, we have to change the law. It took the Government some time to drop their opposition to the idea, but nevertheless, things have moved to a certain extent. However, now we have that, we have to look at what we are going to get in detail, because pay transparency and pay audits are good as slogans, but we need to know what they really mean. We should be celebrating the victory, but we need to go further and get rid of some of the more ridiculous loopholes that I have pointed out.
The law has moved since the 1970s in many ways, including the fact that instead of it being reactive—in other words: “If you don’t do this, you will get sued or taken to court”—Acts of Parliament have taken a more proactive role, beginning with the Human Rights Act 1998. I will not spend time going on about it, but that Act is a living, breathing legal document that puts obligations on organisations to comply with it, and to see their obligations under it and act accordingly. It seems an entirely different type of legislation from the type we have had in the past—and an entirely good one.
We can read across from that to the Bribery Act 2010, which said that if an individual in a company bribed officials, either abroad or at home, unless that company could show that it had systems in place to manage those employees, and therefore the employee was acting wholly outside the way in which the company expected their employees to behave, the company could be liable. We could read across from that to doing the same thing in relation to fraud; so if an individual behaved dishonestly for the benefit of a company, then unless the company could show that it had good management structures in place, the company should be liable.
What has happened with bribery has been really interesting. Experts have been going into organisations and making sure that those organisations have the correct management structures in place and are behaving in a proper way. To use a quote from the leader of my party, it is “responsible capitalism” in action. We can have legislation that brings in responsible capitalism and says to companies, “We expect you to behave in this way. Use your initiative, and get on with it. Stop being complacent and stop saying, ‘Well, it’s not against the law,’ or ‘You can’t take us to a tribunal,’ or ‘You can’t take us to court as things currently stand, so we are not doing anything about it.’”
We could do the same with an equal pay Act, which we should begin with a positive obligation on us all to ensure that equal pay is brought in over the next few years. Women have been waiting for long enough; the obligation should not just be on individual women taking their individual complaints to a tribunal and chipping away at the system one by one, piecemeal by piecemeal. We should all be obliged to ensure that if these women take their cases to a tribunal, they are treated like whistleblowers. If they take a case to a tribunal and they can show that on the face of things, they are a whistleblower, and that, in fact, there is systemic discrimination in that company, action should be triggered by that case. We should then have a more proactive law to ensure that the tribunal can say, “We want a pay audit.”
I know that the Government have changed the law, so that at the end of a tribunal there could be a pay audit, but what does the pay audit mean? It is not sufficient for a pay audit simply to be: “We’ve got 15 women doing the typing, and we’ve got 10 women doing administration, and we’ve got six directors and they happen to be men, and we’re publishing that.” We do not want that. What we want—what I want—is a skills audit to be done under that, so that we look at what skills the women have, in what way they are doing those jobs and what skills they are using. We compare jobs and do a proper jobs and skills audit, so we get under the skin of the box-ticking and look at how there may be a difference between the way in which men and women are paid in organisations.
A tribunal could trigger that after an individual woman has taken out a case. It could be done at the end of a hearing as part of the tribunal’s decision making, or—perhaps even better—at the beginning, when legal action is contemplated. At that point, as part of pre-litigation negotiations, a company or organisation might say, “Yes, we’ll do a proper, profound skills audit.”
My hon. Friend is making a characteristically superb speech on the extremely important issue she has brought before Parliament today. What is her opinion on what we should do about tribunal fees? As she will be aware, they have had such a detrimental effect on the number of cases coming forward across all discrimination tribunals.
If I may, I will answer that later—I have quite a lot to get through, but I will come to that in my speech. I want to pray in aid some more quotes from my hon. Friend the Member for Rotherham, who said—so I know I have a friend in this—
“Why should the burden be on women to investigate pay inequality and to ask their colleagues how much they earn?”
She went on say:
“We should not have to wait for whistleblowers”.—[Official Report, 16 December 2014; Vol. 589, c. 1301.]
That is absolutely right. It is not a rhetorical question, but is very apt in highlighting the unfairness of a system that puts the entire burden on individual women to root out discrimination. They are the victims; we should assist them, and our system should make sure that they are given proper assistance.
We need an equal pay Act that enshrines in law the principle that tackling the wage gap is a collective responsibility. Therefore, a company found guilty of discrimination should be ordered to do a proper, profound pay audit. One of the problems with the changes the Government have made so that a tribunal may have a pay audit done is, first, it is not profound enough, and secondly, it is silent on the issue of how it will be enforced, what the plan will be and how it will work. It is important that we have it as a complete package. It is not sufficient to pass legislation by way of gesture—although I am sure that that was not necessarily the entire motivation. We have to look at the situation carefully and see what is going to work. Without that basis, it will not be enough and it will not work.
Under the regulations, there are no guidelines on what constitutes an acceptable plan and the regulations are silent on enforcement and monitoring. What is more, tribunals are not obliged to order a full audit in all circumstances and may opt out of doing so if it is believed that—and listen to this, Mr Weir—
“the disadvantages of an audit would outweigh its benefits.”
So there we are: the audits may be too superficial, they may not be enforced, there may not be a plan, and in any event they can get out of it if the disadvantages outweigh the benefits. That is hardly the radical stuff that we need in the 21st century.
Given that the Government’s actions have demonstrated the inadequacies of a voluntary approach to tackling the pay gap, we need a new law that requires not only stringent monitoring but vigorous enforcement. In my view, audits should be overseen by the Equality and Human Rights Commission and carried out by experts. I am very pleased to have read the paper, which I believe is circulating today, from the EHRC. Although the commission might not agree with all my suggestions with huge enthusiasm, it seems to agree with at least some of them, so I believe that I am making progress. The resulting action plans should be subject to EHRC approval and continued monitoring, with the threat of referral back to the tribunal for non-compliance.
That is the stick, but I am not talking just about sticks. I am also talking about carrots, and the carrot is that we should actively encourage all companies to carry out regular pay audits and eliminate disparities wherever they arise, even if they are not ordered to do so by a tribunal. A voluntary profound audit and evidence of compliance with the recommendations of an approved plan would virtually insulate companies from any equal pay claims. Prima facie, if a company had done these voluntary audits, had a plan and was implementing it, that would be a defence to any claim of unfair pay. It seems to me that that would be a catalyst for a culture change that shifts the onus of rooting out pay inequality from the victims to the employers themselves.
As the changes took root, we could hope for a greatly reduced need for women to pursue claims against their employers via the traditional route set out in the 1970 Act, but inevitably it would be some time before the changes took effect, so, to answer the question asked by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson), we would need measures to streamline procedures within the tribunals to make them more efficient.
We could begin by encouraging more negotiation as opposed to litigation. A number of high-profile cases in recent years have seen unions trying to come to agreements with employers and then finding themselves sued by claimants—disgruntled women who believe that the settlements are unfair. Obviously, that has had a chilling effect on the actions of many trade unions. Given that it is a risk, but we do need to ensure that there are more settlements, it seems to me that we need to take into account the limited financial resources of many employers. We also need to understand that they need to balance the sometimes competing interests of back pay for claimants with pay protection for existing male employees. A new equal pay Act should include codes of practice, which should have legal standing. Therefore, if a trade union and an employer came to an agreement, and that agreement complied with the code of practice attached to the new equal pay Act—a code requiring the parties to make sure that there was proper job evaluation that would result in a settlement—both the employer and the trade union, prima facie, should have a defence and should not be able to be sued. That in turn, hopefully, would release them to get back on the front foot and start negotiating some fairness and some equality in the workplace.
Let me now deal with the tribunals themselves. When we introduced the Equal Pay Act, there was a period of bedding in, and we should have the same with a new equal pay Act. I think that the whole Act should be jump-started with a period of five years during which there should not be fees for tribunals for equal pay claims. Also, we should consider carefully whether, if an equal pay claim is successful, there should be six years’ back pay, as there is under the current law, or whether we should change that back to two years, which was in the original Equal Pay Act.
I know that the European Court of Justice has said that, given that our old Equal Pay Act is based on contract law, we should give contract law remedies, which is six years, but I think that we have a very strong argument to make. If challenged, we could go back to the European Court of Justice and say, “This is a matter of public policy. We in Britain are doing something about ensuring that we get equal pay in our country, so during this five-year period, we wish to be able to bring in some more carrots and sticks and actually get some action.” We all know where we want to go. We need to make sure that we have a plan that works and will get us there.
It seems to me that that could reverse some of the damage that has been done. Let’s face it, employers fight absolutely everything, and one can understand why. The loss for them is so huge if they lose a case—they have to pay six years’ back pay, and if it is a collective action, that is a huge amount of money—but that is not to say that they should not be doing something. We have to find a compromise, a practical and pragmatic way through this. I suggest scrapping fees not for ever, but for five years, and there are other things that we should do.
I have no understanding of why the Government got rid of the short form questionnaire. Before an action began, employers had to fill in a questionnaire for a woman who wanted to make an equal pay claim, which would give some facts for the woman so that she could take out her case. The Government scrapped that, saying that it was red tape. That is clearly counter-productive, because if the individual woman employee does know the circumstances in which she is employed, sometimes she will have some grist to her mill—she will have some evidence enabling her to take her case to the tribunal properly—but quite often, surely, it will have the opposite effect and she will realise that actually she is not being discriminated against. What is the problem with transparency? Why should we not have people with equality of arms—equality of arms as best we can—going before a tribunal where we all know what we are talking about in advance of it happening?
A new equal pay Act needs to bring back a questionnaire. Two pages—it does not have to be 50, 100 or 200 pages —with some basic information, so that the woman knows where she stands. That seems to me to be very important. The questionnaire should include questions such as “Have actions been taken out against you in the past?” and “Have you had to pay compensation in the past?” That questionnaire would be a minimal burden on employers and a vital tool for women who are trying to embark on a challenge. We ought to be supporting those women, who in the end are our whistleblowers. In the recent equal opportunities review, Professor Bob Hepple wrote a case that, in my view, is unanswerable, saying how important it is to have a questionnaire brought back into law.
We should go further in streamlining the process. We should also bring in senior judges. Employment tribunals, if they are dealing with a large and complex case, should be able to bring in extra firepower—perhaps a High Court judge—who will manage the more complex cases and ensure that they move through the courts and do not get bogged down. It is extraordinary to hear it, but there is at the moment a case that is still trundling through the employment tribunal and is still going through preliminary issues—they have not even got to trial yet—and it is five years on. This is not Barbara Castle’s vision. We are so far away from it, and we need to look again.
I have been clear about my views on the inadequacy of the existing system of individual tribunal claims. We will still need to have a system in which individual claims can be brought, but much more support needs to be given to individual claimants and we need to streamline the process.
I have touched on the ridiculous loopholes. A new Act would need to clear away the fog that existing laws have created around questions about whom claimants can identify as valid comparators. It should simply state that comparators can be based on all operations of a single employer. There have been cases in which a woman has said, “I don’t get paid the same as the guy in the building around the corner,” and a serious argument has been put up, “Well, you’re not in the same building, so it isn’t a comparator.” That is just not right and we have to do something about it. It is not a realistic excuse for inequitable pay.
While we are at it, our new law should provide much greater clarity on the issue of succession. We should certainly get rid of the idea that a man succeeding a woman and getting more pay is not prima facie evidence that she has been discriminated against.
We also need to look at outsourcing. Oxford law professor Sandra Fredman has written that, under current legislation, a woman doing equal work at the same establishment as a better paid male comparator has no claim if she is employed by an agency or outside contractor. Given the massive rise in the use of outsourcing over the years, it is time that we gave statutory protection to victims of discrimination whose employers hide behind that anomaly. We should require that public bodies reach binding agreements with contractors, setting out and guaranteeing the terms and conditions for transferred employees. I have a number of ideas about how we can deal with other issues of fractured employment—for example, bogus self-employment. You may be pleased to hear, Mr Weir, that I do not intend to go into the details now, but I will publish them on my website for those who are keen to know more.
I do not suggest that my proposals will wipe away the lingering effects of centuries of discrimination and eliminate the wage gap completely and immediately. There are other things that we need to do, such as looking at flexible working. Some of the changes made by the Government have been good, but it is a curate’s egg: some of them have made life more difficult. If my mum falls over and goes to hospital, I will need to look after her while she is there and work out what support she will have when she comes out. If I ask my employer for flexible working and he says, “I’ll have a look at it, Emily, but I can’t get back to you for three months,” that is not flexible working, and it makes life very difficult indeed. We need to look at practical solutions for women’s real lives.
We need to tackle the continued problem of the clustering of women in low-paid occupations, which are related to traditional gender stereotypes. Two thirds of women are in 12 occupational groups, including catering, cleaning and personal care. Women may, as Annie Lennox and Aretha Franklin sang, be coming out of the kitchen, but unfortunately they have not got very far, and we need to make sure that they have the ability or the choice to go further. Even if they choose not to do so, we need to make sure that women’s work is properly valued.
We need better careers advice at the earliest possible stage in a girl’s education. We need to address the chronic shortage of women who take up STEM subjects. Some of the ideas that I have read from the CBI on that aspect of equality policy are welcome, but we need to do more. We should make efforts to increase the number of women who take up careers in those growth industries, but our work is not solely about putting more money in women’s pockets, important though that is. A much more fundamental principle is at stake: if, as a society, we do not make use of the extraordinary range of women’s talents, we are a poorer society in every sense of the word. Since the Government came into office in 2010, the wage gap has continued to shrink, but only by an average of 0.35% a year. By my calculation, if we continue on that trajectory, it will be another 55 years before the gap is finally closed. I hope hon. Members agree that women have been waiting quite long enough. We are no longer content to wait. We need to legislate, and we need to be bold. Let’s get radical. Let’s pass ourselves a new equal pay Act.
It is a particular pleasure to serve under your chairmanship, Mr Weir. I congratulate the hon. Member for Islington South and Finsbury (Emily Thornberry) not only on securing the debate but on setting out the case so clearly and persuasively for reform of the Equal Pay Act 1970. I support, in principle, the call for the 1970 Act to be brought up to date and into line with the needs of our society, our economy and our labour market in the 21st century. I am disappointed that only women MPs have shown up for today’s debate. Is it not shocking that there is not a single Government Back Bencher here for such an economically and structurally important debate? The subject of our debate impacts on all our lives and on the lives of men, because they also have to deal with the consequences of unequal pay.
The Equal Pay Act 1970 was introduced the year after I was born. Although women’s participation in the labour market has been transformed in the intervening 45 years, the pay gap remains stubbornly entrenched. Progress has been painfully slow, and even women of my generation, who expected to be the second generation of women to experience equal pay, still find that, on average, our pay falls significantly behind that of our male counterparts.
I want to say a few words about Scotland. Although compared with other parts of the UK, we have had higher rates of women’s participation in the labour market, consistently lower women’s unemployment and higher women’s employment over the past few years, our pay gap appears to be slightly wider. There are different ways of measuring that gap, but according to the Close the Gap campaign, provisional figures for 2014 indicate an 11.5% pay gap in the hourly rate for full-time workers, and a massive 32.4% pay gap between the hourly rate of women working part time and men working full time. Women working part time are earning almost a third less. Given that 78% of part-time workers in Scotland are women, the gap will have a long-term impact on women during their working lives and in retirement, when they are likely to have far lower pensions than men and to be far more susceptible to poverty in old age.
I take this opportunity to pay tribute to the Close the Gap campaign, which is doing much to lobby on equal pay in Scotland. I also pay tribute to Engender and the Scottish Women’s Budget Group, which provide a lot of research and analysis that informs not only the raising of awareness but action to tackle the problems caused by unequal pay. At the moment, on average, a woman in 21st-century Scotland earns £95.60 a week less than a man. As we know, a significant part of the problem is occupational segregation. Women are over-represented in jobs that tend to be low paid, as the hon. Lady has said, such as cleaning, caring, clerical work, catering and retail jobs. It is also significant that in Scotland, according to Close the Gap, 48% of women work in public administration, education and health.
Women represent more than half of workers in only six of the 20 standardised industry classifications, whereas men tend to be more evenly spread across industry groups. Some 80% of administrative and secretarial workers and those in personal service jobs are women. Women are more likely to work in the public sector: 67% of local government workers and 81% of NHS workers, but only a third of chief executives, are women. We know that 97% of child care and early years education staff are women, and 98% of classroom assistants. By contrast, less than 3% of chartered civil engineers in Scotland are women. I have been working hard with my local college and schools to try to change that, and some of the local companies that recruit people with STEM qualifications are keen to encourage such change. We are making progress with getting girls into engineering, but it is a long-term challenge.
The hon. Lady has alluded to the fact that the vertical distribution of pay in organisations often betrays a gendered division of labour. Higher-paid jobs are predominantly done by men, and lower-paid ones tend to be done by women. It is disappointing that efforts to encourage companies voluntarily to audit their pay structures by gender have had such derisorily poor uptake, especially when companies that have done so have changed their policies and practices as a result and become a lot more aware of their own institutional biases.
The hon. Lady made the point at length that it has become much more difficult for women to seek redress if they believe that they are being discriminated against in the workplace. A core underlying factor in the pay gap is the fact that caring for young children and frail, elderly, sick or disabled relatives still falls predominantly to women. It is often perceived to be a woman’s duty to step up at times of family crisis or illness. Consequently, too many women—mothers and unpaid carers—take jobs that they can juggle around their caring responsibilities. Too often, that means part-time, low-paid, insecure and low-skilled work, sometimes on zero-hours contracts, even when those women have the skills, experience and qualifications to take on much higher levels of responsibility. That is a huge waste of human and economic potential, and it costs our economy dear.
I do not mean in any way to undervalue the choices that people make to prioritise their family; I am merely reflecting the lack of choice and flexibility that women have when they are trying to establish a balance between their working lives and their home lives. Our workplaces and our legislation—indeed, our legislative system, although I will not say too much about the House of Commons today—have not kept up with changes in our society and with the aspirations of both women and men to earn a living and have a life. We need to take much more account of the impact of care in our economic models.
A step change in access to child care is as important as other legislative measures to tackle unequal pay. The cost of child care is simply prohibitive for far too many people, especially when it is combined with the cost of commuting to and from work. It acts as a huge disincentive to mothers who are keen to be in the workplace, and who want to work and use their skills and qualifications, but who cannot do so because they cannot earn enough to pay for child care and commuting. That problem gets even worse during school holidays, when many parents find that they are effectively working for nothing because they have to pay for very expensive child care over the holiday period. Sometimes, they have difficulty arranging any suitable child care at all during the summer months. That is helping to entrench occupational segregation, and it is driving the casualisation of employment.
Many things can be said about this issue, and I do not intend to make a long contribution, but introducing free access to child care and increasing the hours of child care to which parents are entitled goes much further than simply introducing tax breaks on child care, which tend to help women in higher-paid occupations, but which do nothing for the millions of women who top up their low pay with tax credits and who are already struggling to make ends meet.
In recent times, we have seen evidence that the pay gap is closing for younger women. Obviously, that is to be welcomed, but we should not be too congratulatory or pretend that the problem has been solved, because such developments are not really a sustainable solution. We need to think much more long term about how those women will fare in later years. If the only way for women to close the gender pay gap is not to have, or to delay having, children, that is simply not sustainable in terms of our demographics.
We therefore need to look at flexible working and at protecting women’s rights in the workplace. I absolutely agree with the hon. Lady that we need to bring the Equal Pay Act 1970 into the 21st century.
Has the hon. Lady, like me, met young women beginning their careers who believe they will always be paid equally with men? When I point out that they would face an increasing gap with their contemporaries if they had children and tried to go back into work, they look at me as if I had two heads. They simply do not believe that that can happen, but we all know it does.
It is interesting, and I have seen it in my own generation. When I was young and fresh-faced, I came out of university keen to build a career. If anybody had told me then that I would be disadvantaged in the labour market, I would probably have laughed at them. However, women find out the truth very quickly; indeed, that happens when they are first appointed to their jobs—in my day, there was still a big gap in starting salaries. There is also the issue of how they negotiate pay increases as they go through their careers. It is therefore difficult for young women to keep pace with their peer group.
It does not matter how hard they work, how committed they are or whether they have children; the pay gap persists for women who do not have children, as well as for those who do. This is not just as simple as whether a woman has a family. The layers of discrimination are often very subtle, and they have to do with the cultural dynamics in organisations and the vertical integration the hon. Lady and I have talked about.
Audits within organisations are therefore important, because they can expose to personnel departments their unconscious biases in offering different starting salaries to men and women and in looking at people’s investment in their careers and career progression. The hon. Lady therefore makes a good point, and I would absolutely encourage young women to be assertive in the workplace and to chase the careers they want. As a society, however, we cannot let that happen at the expense of the work-life balance, and it must be possible for women to pursue careers in a sustainable way, without burning the candle at both ends, and then some. At the same time, it cannot just be women who take responsibility for work-life balance. However, I was just winding up when the hon. Lady intervened, so I will do so now and hand the floor to other contributors.
It is a pleasure to speak under your chairmanship, Mr Weir. I congratulate my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) on securing this important debate. It is important because we are coming to the end of this Parliament, and who knows what will happen after the election? It is also important because, irrespective of what people think, there is a fundamental principle that those who do the same job should be paid the same amount. It is well documented and accepted that, on the whole, women in the job market do worse than men in terms of pay.
I want to place on record my thanks to the Dagenham machinists who took action over equal pay, leading to the 1970 Act. However, 40 years later, women are still being paid less than men, which means they effectively stop earning, relative to men, on 4 November in any year, which is why that is equal pay day. On average, a woman earns £5,000 less than a man, whether they are in a part-time or full-time job.
There are many reasons for that. One is the motherhood penalty—the impact of having children—which affects women’s careers and earnings. There is also the fact that many women were employed in public sector jobs and are now having to go into the private sector, where the pay gap is often big and where no one knows what somebody may be earning. Since 2008, almost 1 million women have moved to low-paid jobs, zero-hours contracts and temporary jobs. Where women have become self-employed, the pay gap with men is 40%. Women are also still the primary carers for their children, elderly parents and other relatives, and we know how much pressure the growth in the elderly population is putting on the family and particularly women.
The good news is that more women are in upper management in different industries, but research from the Chartered Management Institute last year found that female managers aged 40 or above took home 35% less on average than their male counterparts. There is also a difference in bonuses. The average female director gets £41,956, but the average male director gets £53,010.
Some of what I am saying is in the public arena, but many people are still surprised by it. As has been alluded to, some young women probably think they will be paid equally with someone else because they will be doing a similar job, but they will find that the reality is very different. There is also still gender segregation, in that there are jobs that women do not tend to do. There are not many opportunities for women in those areas, whereas there are for men, who can earn quite a decent income.
I do not want to repeat everything that has been said, but my hon. Friend the Member for Islington South and Finsbury put forward some practical steps Governments can take to deal with these issues, and those should be taken on board. In that respect, I was disappointed earlier in this Parliament when the Government changed the rules on employment tribunals, effectively making them even harder to access and inevitably imposing a financial penalty on people. The mind just boggles.
As a barrister, I did not practise much in employment law, but I did a lot of voluntary work, and I went to employment tribunal appeals on behalf of claimants—many were women, some were disabled and some were from the ethnic minorities. It is not an easy thing for people to go to the tribunal system, as the Government suggested when they made their changes. Someone who is dismissed does not simply say, “Right, the first thing we are going to do is go to a tribunal, because that’s the way to deal with this.” The tribunal system was the last resort for many people. Although many people were discriminated against and unfairly dismissed, only a tiny percentage ever made it to an employment tribunal. At that point, however, there were at least judges and others who could independently evaluate the case.
The current financial penalties did not exist then. Putting such restrictions in place means that people can now rarely go to a tribunal. Constituents have come to me in my constituency about work-related issues. They want to go to an industrial tribunal about the way they have been treated, but they are unable to, because they are blocked from doing so. The changes the Government have brought in are punishing people. At least previously people had recourse to a tribunal, to which they could get access without too much difficulty. Now that is not possible, so will the Minister reconsider the tribunal issue and a return to the previous system? It worked fine, and was not being misused. Before a hearing, there would always be a case management hearing in which the tribunal judge would sit with the parties for discussion of the evidence, to learn what the contentious issues were. The tribunal would concentrate on the narrow issues that were the subject of dispute, and not spend time unnecessarily on issues that everyone agreed about.
I am sorry to say that the present Government’s ideology and rhetoric are anti-employee and anti-trade union. They comment all the time in Parliament on the fact that some Labour MPs have union funding, and make it sound as if it is really bad. Guess what? The unions are made up of working people who choose to give the union their subscription. If the union donates money to a political party, that is because the Labour party is the one that has always pushed for equal pay and workers’ rights and campaigned on discrimination. It created tribunals as useful bodies for people whose rights were being taken away. Now the majority of people cannot get access to a tribunal. There is an ideological dislike of the working person, and we should get rid of that mentality. There is a lot of bullying, intimidation and discrimination in the workplace. Women—and other groups as well—are suffering discrimination. That is not good enough. I ask for the question of tribunals to be reconsidered.
My hon. Friend the Member for Rotherham (Sarah Champion) argued for pay to be published. That is important—it is only right and fair. We believe in transparency and think that everyone should know what is going on. We believe in fairness; but where is the fairness in not telling someone what the person next to them earns, especially if they do the same job? The civil service and public sector are open about pay and grading, and what salary goes with what grade. What is wrong with the private sector doing the same? What does it have to hide? It hides the information because that allows it to discriminate without anyone being able to tell. It allows managers to pick favourites and to discriminate in secret, knowing that no one will jump on them for that. If we believe in an equal, fair and transparent society, that should be one of the first things we should deal with. The Government have been asked to do it, and have not.
Primary legislation would not even be needed, because regulations to require pay to be published can already be passed under section 78 of the Equality Act 2010, before the next election. It is not difficult, and it is important, because it would help women and would discourage employers from the practices in question. If they knew that what they were doing would be in the public domain, they would stop doing it. It would be a concrete step, and not a very complicated one, to help women to argue for fair pay. It would effectively stop private employers discriminating against women and getting away with it. It is not too much to ask for; it is a simple thing in a fair and equal society, and I ask the Minister to consider it.
It is a pleasure to serve under your chairmanship, Mr Weir, for what might be my last ever outing in Westminster Hall—that might be true of all of us here for today’s debate.
I congratulate my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry) on securing this timely and important debate and on the work she has done on the issue over the years. Like her and the other hon. Members taking part in the debate, I am passionate about the topic. My hon. Friend’s research and insights are a testament to her dedication to the cause. What she has proposed and the things she has highlighted show why we can never take a back seat and hope for the best. I am proud, as I am sure she is, that the Labour party and Labour movement have always been true to that belief and are committed to continuing that tradition long into the future.
I am pleased that my hon. Friend the Member for Rotherham (Sarah Champion) was able to attend part of the debate, because she introduced an excellent ten-minute rule Bill a few weeks ago on the section 78 transparency clause. I am pleased that that eventually spurred the Government to act on the matter, after five years of sitting on it, and I am pleased to say it went through in the House of Lords last week.
In government, Labour was a strong advocate of gender equality in all sectors of society. We closed the gender pay gap by a third when we were last in office, oversaw a rise in the number of young women going into higher education—when they overtook boys for the first time in history—legislated to protect women from abuse at home and in the workplace, and, in one of the last acts of a Labour Government, in 2010 we passed legislation that would have made huge strides in tackling the gender pay gap by making large companies publish their hourly pay rates by gender. We were also the party that 45 years ago passed the very Equal Pay Act that we are discussing today. Decades have come and gone since the Act became law, but the problem it attempted to solve is still, sadly, very much with us, and today’s debate is a timely reminder of that.
On average women earn 81p for every pound a man earns, and recent figures cited by the Equality and Human Rights Commission show that women in full-time employment in 2014 earned almost a full 10% less than their male equivalents. That is truly shocking. Things are even worse for women in part-time work, where they earned just under 38% less than male full-time employees. The overall gender pay gap for all employees was 19.1%. It seems ridiculous to think that after 45 years of work and 15 years into the 21st century women are still not on equal terms with their male counterparts.
Last year, thanks to the debate led by my hon. Friend the Member for Rotherham, I was fortunate enough to meet some ladies who worked at the Ford plant in Dagenham. The Minister was also present—as was my hon. Friend the Member for Islington South and Finsbury. Anyone who cares about this issue was there. Those women famously went on strike to fight for equal pay, and their actions went a long way to bringing about the first Equal Pay Act, in 1970. Speaking to them it was fantastic to see women still so passionate, committed and hopeful of success, but it was also tragic that after so many years have gone by the imbalance has only been decreased, never destroyed.
Last week, my colleague, Baroness Thornton, highlighted contemporary examples during the debate in the House of Lords on gender and pay, such as the woman working in advertising whose end-of-year bonus was a £100 Liberty voucher, while her male counterpart received £2,000 cash; or the lawyer who was asked to take a pay cut to avoid redundancy, only to find out that none of her male colleagues had been asked to do the same; or the woman who worked in the media and, overhearing two male colleagues boasting about their salaries, realised that both were being paid an average of £10,000 more than she was, despite the fact that she had the same experience. Such gross inequalities are commonplace and things need to change.
Over the years women have had to contend not only with lower pay, but with the problems of glass ceilings, sexual discrimination and a tendency to be penalised in the work force for having children. We have made progress in those fields over the past decades, but too many women are still caught in a culture in which they are told that they have to choose between being carers or having a career, or they have had it drummed into them that they cannot achieve the same things as a man. That mentality holds back our society and all women. We know that companies with more women on their board routinely outperform their rivals, so any glass ceiling that limits a woman’s rise to the top also limits a company’s performance. Glass ceilings should be shattered for the good of everyone. As well as championing equal pay, Labour is committed to opening more boardrooms to women and will legislate to do that if companies do not understand the enormous benefits of doing it themselves. All those problems are linked, and none of them can be solved overnight. Only through dedicated and consistent hard work and pressure can we achieve meaningful and long-lasting success, so it is disappointing that over the past five years we have seen the cause slide down or, more accurately, slide off the political agenda, and it is no wonder that more problems have been caused as a consequence.
As I briefly alluded to, the Government’s record comes up extremely short on addressing inequality. Their record on the gender pay gap in particular can be described only as woeful. The coalition inherited a section of the Equality Act 2010 that would have made all large companies—companies with more than 250 employees—publish their hourly gender pay rates in their annual reports. That requirement was designed to build on existing equalities legislation, thereby boosting transparency and shining much needed light on the issue, which would have forced companies to look at themselves, see the extent of the problem and work towards addressing it. Sadly, the huge value of that section was either completely ignored or totally lost on the coalition Government, who refused to enact it. However, as I am sure all hon. Members present are aware, with two weeks to go before Dissolution, and facing a likely defeat in the House of Lords on Labour’s push for the enactment of section 78, the Government performed another policy U-turn and finally saw the light. I hate to question what may have been a truly Damascene experience for the coalition, but I fear it was a victory for political pragmatism more than for the ideals and values of gender equality. Although the outcome is extremely welcome, the last-gasp way in which it was achieved is sadly symptomatic of a Government who place no priority on equality legislation.
During the past five years, we have seen consistent inaction in the face of repeated calls from the Opposition to do more, or indeed to do anything. One has to wonder how much more we could have achieved on equality if that time had not been totally wasted by the Government. The recent victory only brings us back to where we were in 2010 and, sadly, we have regressed in some areas. The overall gender pay gap fell by a third under Labour, but that rate has slowed dramatically under this Government. The gap actually increased in 2013, partly because the so-called economic recovery saw a rise in low-paid jobs in sectors dominated by women, such as care, and a rise in insecure zero-hours jobs in which women also outnumber men.
Since 2010, the number of equal pay claims brought against employers has fallen from just over 37,000 a year to around 17,000, with the most dramatic fall happening since the coalition’s introduction of tribunal fees. That fall came as no surprise to many Opposition Members, who predicted that it would happen. We were not scaremongering, as we were accused, but it was utterly shocking, none the less. Women are now being put off fighting for equal pay, and the message that the introduction of tribunal fees sends out to women across the country is extremely damaging for the cause. I am interested in the proposals to address the situation suggested by my hon. Friend the Member for Islington South and Finsbury. As she knows, Labour fought against the introduction of tribunal fees and, when we are back in government, we will introduce reforms to ensure that cost is never a barrier to justice.
Equal pay should not have been something for which we had to fight for so long. In truth, more should have been done in the 45 years since the 1970 Act was passed to keep it fresh and doing what it needs to do. My hon. Friend expertly raised a number of issues, and they all need to be addressed. I am sure none of us believes that the Act cannot be improved to meet the new challenges of modern Britain. In her proposals, she made many points and cited many examples with which it is hard to disagree, and I would welcome a much deeper look at those issues. That is why I am pleased that Labour supports a review of the Equal Pay Act to see which areas are working, which areas need improvement and which areas are either redundant or need entirely new provisions to make them fit for our modern world.
The goal of the Equal Pay Act to deliver the promise of equal pay has not changed since 1970. We need to establish whether that means amending the Act or introducing something new, and we believe a comprehensive review is the best way to do that. The Equality and Human Rights Commission recently announced that it is also in favour of such a review, and the commission’s experience makes it perfectly placed to ascertain where best to take the Act from here. I am sure the commission will want to see my hon. Friend’s work when it undertakes that process.
Sadly, this debate is as necessary today as it was in the 1970s. The more momentum we can build for reaching the goal of equal pay, the better for every single person in our society. We may have lost five years to complacency and inaction, but we now have a chance to push on and complete the work for this generation and for generations yet to come. Labour is committed to that fight, and I look forward to a time when such debates are consigned to the realm of history, not politics.
It is a pleasure to serve under your chairmanship, Mr Weir. I emphasise the word “man,” because you are the sole male MP in the Chamber. The hon. Member for Banff and Buchan (Dr Whiteford) made a good point that men, as well as women, have an important role in fighting for equality. Such debates answer the question whether having more women MPs makes a difference.
I congratulate the hon. Member for Islington South and Finsbury (Emily Thornberry) on securing this debate and on putting forward an interesting set of proposals into which she has clearly put a great deal of thought. I recognise that equal pay will not be addressed in the next 10 days, but she has started the debate now on what needs to be a careful consideration of equal pay laws and whether they are delivering the outcome that we all want. She wrote an article about equal pay for the New Statesman, and she spoke about it in the international women’s day debate a couple of weeks ago. Her contribution is excellent and welcome, particularly because of her legal expertise. It is good that we have diversity in this place, with some Members having legal expertise and some Members not having legal expertise. As a non-lawyer, I found her speech interesting.
In the hon. Lady’s powerful speech, I particularly loved the example of the fight for equal pay beginning with church choirboys and girls, and quite right, too. She ended her remarks by saying, “Let’s get radical,” and I am open to radical ideas for proceeding on these issues. The legislation, which was of its time, may need to be revisited and addressed. Indeed, this is a particularly timely point to do that because, although the Equal Pay Act was passed in 1970, the provisions were rolled into the Equality Act 2010. The Government are undertaking a thorough five-year review of that Act, which will include the equal pay and sex discrimination provisions, with a view to reporting to Parliament later this year. This is a topical and timely point at which to have this wider debate.
The hon. Lady set out the history of the Equal Pay Act, which came from the battle of the ladies of Dagenham —I agree with the hon. Member for Washington and Sunderland West (Mrs Hodgson) that it was a great privilege to meet them—and addressed blatant pay discrimination. It is important to recognise the difference between the pay gap and pay discrimination because it is easy to muddle the two terms. A casual observer might think they are the same thing, but outright pay discrimination is different from the pay gap itself, which is caused by discrimination, yes, but is also caused by other factors. About a third of the gender pay gap is due to occupational segregation. Typically, an engineer will be paid more than somebody working behind the till in a retail establishment. Women tend to be more concentrated in such sectors and in roles that are less well paid. Roughly about a third of the pay gap is because of time taken out of the labour market, largely because child care responsibilities still tend to fall disproportionately on women rather than men, but it is not solely about child care. There is also caring for elderly relatives and other reasons for time out of the labour market.
Other factors contribute to the pay gap, including pay discrimination and other issues that have been discussed today such as unconscious bias and perhaps the social conditioning of girls and boys. We still live in a very gendered world. A man might negotiate a pay rise in a different way from a woman, and that can lead to problems with the pay gap.
The Government’s record in tackling some of the issues has been positive, although I absolutely accept there is still a long way to go. On occupational segregation, there is a dearth of women in the STEM sectors: fewer than 10% of engineers are women, for example. We have the Eurolife initiative. We have recently published new careers advice aimed at parents, called “Your Daughter’s Future”. Although careers advice in schools is important, it is also sometimes about the messages that girls get at home.
I recently visited some apprentices in the construction industry in my constituency. Only one of the apprentices is a girl. I chatted to some of the young men who are doing their apprenticeships there. I said, “Why did you come to do an apprenticeship in construction?”, and one of the young men said, “My family encouraged me to do this.” He said that he had a sister, so I said, “Did they encourage her to go into construction as well?”, and he said, “No, they encouraged her to do a beauty course.” So the family environment matters. We live in a society with a lot of stereotyping generally, so that guide for parents might break down some of the stereotypes that people have in their minds. They have an image of what engineering is. They imagine someone in oily overalls working in a dirty factory environment, but high-tech modern engineering is a million miles from that. Sometimes people’s ideas about what certain careers entail are stuck in another time.
We have also worked with the Institute of Physics and the Royal Academy of Engineering to get role models into schools. STEMNET ambassadors, 40% of whom are women, do a fantastic job in encouraging girls to aspire and to get involved and interested in the issues. Part of the problem is also the wider cultural issue of stereotypes that start to take root at an early age, before children even start school. Certainly, the Government have a role to play in some of that, but, more widely in society, there is cultural campaigning, and the feminist movement is particularly valuable in addressing that.
We touched on time out of the labour market and the pay gap in the international women’s day debate. The 19% pay gap gives us a part of the picture, but while the pay gap is almost eliminated for women in full-time jobs under the age of 40, there is the massive problem that at that stage in women’s lives pay diverges hugely. A big part of that—not the only part—is about child rearing and the fact that such responsibilities are still shared unequally. That is why I am so passionate about the new shared parental leave laws, which I introduced. For babies due from 5 April this year—some might be born already—their mums and dads will be able to choose how to share the leave. I believe that that will drive radical change, and I want to do everything possible to break down some of the cultural barriers that will stop men taking it up. In year one, a certain number of people will take it up. In year five, it will be more, and in year 10 it will be even more, because this cultural change is happening. It is part of men generally being much more involved in their role as fathers.
In the 1950s, it was very unusual for men—a tiny percentage—to be present at the birth of their child, but that is now commonplace. Men used not to take paternity leave, but now most men take some time off after their baby has been born. I think this tide is going in the right direction, but we need to do everything we can to hurry it along.
The Minister is making a very good speech. There is very little that I disagree with, but there is an additional element. Although we should welcome the fact that younger men are prepared to be more actively involved in their role as fathers, they still leave two thirds of the unpaid work in the home to women. Are they hoovering? Are they ironing shirts? Is there anything that can be done to encourage them to do that?
Shared shirt ironing would certainly be a winning policy for half the population. The hon. Lady is absolutely right. There are the wider domestic responsibilities, too, which are harder to legislate for, but there is interesting research on the harmony of relationships in which domestic chores are spread more equally.
Flexible working delivers two things. If men are more involved in caring responsibilities, it makes it easier for their partners as mums to combine their roles at work with their mothering responsibilities, but it also means that the workplace starts to change, because it is not only women who want something different. Dads are involved in that as well. That means we can start to reduce the parenting penalty. Flexible working becomes more commonplace and much more normal. That is why the extension of the right to request flexible working to all employees is so vital. Although parents already had it, it is about making it something that is not stigmatised and is just a modern, agile way of working.
The issue is not only about children. The hon. Lady mentioned flexible working in relation to carers. We have changed the legislation so that requests have to be considered in a reasonable manner. In the case of an urgent request for a specific issue, it would not be reasonable to wait three months for a decision. We are piloting a wider piece of work on how to get more carers into employment. Many carers want to stay in employment, and there are different ways in which they might be able to be supported to do so. So we will get the results of those pilots in different parts of the country and perhaps move forward.
I agree with the point about unconscious bias and discrimination. The hon. Member for Rotherham (Sarah Champion) said that it should not be the woman’s burden to find out what people are being paid and then take up the fight. I absolutely agree. The pay gap is not the fault of women, but equipping women with the confidence and skills to negotiate hard for a pay rise is also a sensible thing for us to do. So I welcome the guide by the Everywoman organisation that we were able to publish, which sets out basic things that women might consider when they go into pay negotiations and how they might argue for a pay rise. We should encourage women as well as men to develop such skills. The Women’s Business Council will shortly be publishing a guide for business, called “Mending the Talent Gap”, which looks at why, from an employer’s perspective, dealing with the pay gap is important. It looks at what it is and what they can do about it.
On the specific issue about whether all women in the employ of a particular business should be awarded equal pay, it is currently possible for a tribunal judgment to be read across. Certainly, the risk of future pay claims is one that would encourage most employers to do so. What the hon. Member for Islington South and Finsbury said about comparators was fascinating. She raised the point about whether the comparator had to be employed at the same time. During the 2010 discussions on the Equality Act 2010, the Government agreed to Lord Lester’s amendment that comparators are not limited to people working at the same time as the claimant, which is in section 64(2) of the Act.
The hon. Lady also mentioned delays, which relate to the issue about comparators. One of the reasons for a delay is that the reporting and working out of what the comparators are can be a process that takes months on end. Part of that is inherent in trying to deal with 45 years of case law that has built up, but perhaps that is something that highlights the importance of looking again at whether this can be made simpler.
The Minister has just made a point about someone taking over someone else’s job and whether a person can say they are being discriminated against if the other is paid more. There is a problem with the Equal Pay Act 1970 and it is in the notes of guidance. Perhaps we can discuss this outside Westminster Hall. I appreciate that if Labour is carrying out a review and the Government are also carrying out a review, and we have highlighted this issue enough, presumably the right people will look at this matter.
I certainly hope that that will be the case.
The hon. Lady also asked how far back the backdating goes, as the six years is quite a perverse disincentive to companies to get on and deal with this matter. As she rightly said, the potential issue is about a legal issue, in terms of the European Court of Justice ruling. However, it is worth exploring this matter in the review process to see whether anything can be done on it.
As for bogus self-employment, clearly the employment status review that is under way at the moment will look at a range of issues, because bogus self-employment is a problem not only in terms of equal pay but much more widely.
Regarding the pay audits that are in place where a tribunal has found that companies have been found not to have paid men and women correctly, there is redress. The order that was passed in Parliament provides for a £5,000 fine to be imposed for failure to produce an audit, and the audit must be published. The Equality and Human Rights Commission is in a position to monitor these cases and therefore it can pursue an employer further if it suspects that it has not complied properly with what is required of them.
On the particular issue about the exemption if the disadvantages of pay audits would outweigh the advantages, I understand the concern that the hon. Lady raised. Perhaps, however, I can provide some reassurance about the intention behind it. It was primarily put in to avoid the risk that would arise if an employer was close to insolvency, and was told that it had to undertake an audit, the cost of which would tip it into receivership and therefore end up jeopardising the jobs of employees. So it was there for very specific circumstances and not for general circumstances. I hope that she agrees that in the kind of specific circumstance I have just described, the overriding responsibility is to try to safeguard jobs in a business that could still be rescued and that could continue as a going concern. There may be some limited circumstances where that would be the case, but the exemption was certainly not envisaged as a wide exemption.
Pay transparency is hugely important. The hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne) raised it, as did others. As for section 78 of the Equality Act 2010, I will put something straight about its chronology, because I fear that history is being slightly rewritten in this debate. In the debates in 2010 during the passage of the Act, it was my right hon. Friend the Member for Hornsey and Wood Green (Lynne Featherstone) who made the case for pay transparency. The Labour Government at the time were ultimately forced to take a power in the Act to be able to introduce that. However, the Labour Government at the time said very clearly that they wanted to adopt the voluntary approach first; in fact, they gave an undertaking that they would do so for at least three years before bringing anything else forward. In negotiations within government subsequently, that made it much harder to win an argument to go for pay transparency at an earlier stage. I want that to be clearly on the record and I am absolutely delighted that we are bringing forward the proposal to activate section 78 of the Act, because it is a vital tool to shine a light on the problem.
One reason why some people have not liked that idea is that it will make quite uncomfortable reading for some organisations. That is a very good thing, because they should be uncomfortable about a pay gap, and all credit to the five companies that have gone forward and already published information about their pay gaps. However, when I spoke to some of the people who argued for that action within those organisations, they told me how difficult it was to get it through their own legal departments because they were so worried about the outcome.
One important thing to bear in mind is that a difference in pay does not automatically mean that an employer is discriminating, because there are a range of reasons why that difference could exist. Nevertheless, the point is that having that transparency means that questions can be asked, and that if there are particular reasons why there is a difference in pay they can be set out by the employer. It also means that the employer has to ask questions of itself, so that it can provide answers to those questions, whether to employees, to the media or to customers who may be interested. That consciousness about what is going on is hugely important.
Think, Act, Report is the Government’s initiative, and 2.5 million employees are covered by the 270 companies that have signed up to it. It is worth putting on the record that while it has not delivered significant pay transparency, about half the companies who have signed up are conducting pay audits, and so on; they were just not publishing those audits. Also, the initiative was very much designed to be about things wider than pay. Pay is a hugely important issue, but the initiative is also about recruitment of women, retention and promotion within the workplace—all those different strands of gender equality. While legislation has been needed to force the issue of pay transparency, none the less the initiative is valuable, because companies can share best practice and learn from one another about how to promote gender equality.
All those other elements are important if we are going to solve the issue about the executive pipeline—how we get women into more senior roles and how we address these different issues. Organisations may have problems at the recruitment stage. For some sectors and some companies, that is exactly where their problem lies; their intake of new staff out of education is not equal. However, other companies have an entirely different set of issues. They may have a 50:50 gender divide of their intake, but they suddenly lose lots of women part way through their careers. Last night, I was at the everywoman in Technology awards, where a scary statistic that was given was that 41% of the women who go into work in technology leave after 10 years. So, not enough women are going into that industry—only about 15% of jobs in technology are held by women—and there is also a real problem in retaining women. We need to look at all those different elements of gender equality.
Other issues have been raised today. The hon. Member for Banff and Buchan (Dr Whiteford) rightly identified the cost of child care as a key issue. This Government have taken steps to help to address that issue, which I am very proud of. In particular, we have extended free early years education to 15 hours a week for three and four-year-olds, and indeed to 260,000 of the most disadvantaged two-year-olds, which is 40% of two-year-olds. That is really positive, although I hope we can go further in future; that is certainly what I want to see. I also hope that the Scottish Government can be encouraged to follow suit, because their extension of free early years education to two-year-olds currently reaches only 15% of two-year-olds, so there is a more lot more that we can do on both sides of the border.
Of course, the Scottish Government have not over-promised more than we can deliver. That is why we have set those targets. Other parts of the UK have set very ambitious targets but have not been able to meet them. Surely, however, the bigger ambition is to get all children under the age of five into as much child care as their parents need to be able to do a job and fulfil their economic aspirations as well as their child care responsibilities.
There are two reasons why early-years education is important. One of them is that, regardless of whether parents are working, once children are over the age of two, and certainly once they are over the age of three, there are real developmental advantages to them having some quality early-years education. The second is related to the point that the hon. Lady raises about the child care element; child care can make the difference to whether it works economically for a family for the parents to be in work, and it is important to provide that choice. One of the big issues is the gap that exists at the moment, because if someone has to wait until their child is two before it makes economic sense to go back to work, and if they are going to have more than one child, that situation can suddenly lead to there being four, five, six years out of the labour market, which can have a really negative impact on someone’s career. If someone had wanted to go back to work, perhaps in between having their children, it is a shame if they are not being enabled to do so. That is another issue that the future Government should look at.
The hon. Member for Bolton South East (Yasmin Qureshi) raised a particular issue about employment tribunal fees, and other Members raised it, too. We are absolutely aware of the drop in equal pay claims. In my role as both a Minister at the Department for Business, Innovation and Skills, and the Minister for Women and Equalities, I absolutely understand the concerns that have been expressed. The Government are committed to a review, including on the equality impacts of this policy of having fees and the level of those fees, and on the impact that those factors have on access to justice.
As Members will know, that policy sits with the Ministry of Justice, which has full access to all the data. I am looking forward to that review. From a BIS perspective, we are very keen to be helpful and BIS officials are already looking at the evidence that is available, which has been published by a range of bodies; those officials are analysing the data they can analyse. Of course, when the MOJ launches its review, at least some of the necessary analysis and work will already have been done. As I say, I understand the concerns that have been raised about this issue.
In conclusion, we have had a positive debate this afternoon. Equal pay is an important issue for us to make progress on, and to continue to make progress on. There is a whole lot of food for thought, in terms of how the shape of equal pay law might be fit for the next 45 years.
In the next half an hour, I will talk not about the success story of the UK motor industry today, but about what happened to one company, and about the impact of what happened on a community and a region.
April 2015 will mark 10 years since the collapse of MG Rover. None who lived through that time—I am pleased to be joined by my right hon. Friend the Member for Warley (Mr Spellar)—will ever forget April 2005. The effect was most keenly felt by employees of MG Rover, more than 6,000 of whom lost their jobs, and it was felt by whole families. However, it went further than that: it was about the identity of an entire area.
The collapse of MG Rover happened in the middle of an election campaign. When elections are on, it is usually difficult to get any politicians thinking or focusing on anything else. However, for all of us involved in events at Longbridge in 2005, the election was a sideshow. What was important was just being there at Q gate at Longbridge; and working with the city council, the taskforce and the Government to see if the administration of MG Rover could be prevented from becoming liquidation—and, if not, dealing with the consequences. All this happened in what should have been the centenary year of car making at Longbridge.
Part of me wants to say that I never experienced anything like that before. However, for many of us this was the second time we had been through something like this at Longbridge. In spring 2000, without warning, Rover Group’s then owner, BMW, announced that it was pulling out. Longbridge was to be sold to a firm of venture capitalists called Alchemy, led by Jon Moulton. If that Alchemy deal had gone ahead in 2000, Rover would have been rapidly downsized to become a small manufacturer of MG sports cars.
The west midlands as a whole, and the Government, pressed BMW to at least consider alternatives. The Government intervened to create a Rover taskforce, to bring the region together: it united government, universities, businesses, local authorities and trade unions. I was one of two Members of Parliament on that taskforce. Its task was to see how the region could accommodate downsizing a company on whose future the supply chain, and swathes of midlands industry, was then dependent. Within weeks it was clear that it could have been worse.
Negotiations between BMW and Alchemy collapsed. Rover at Longbridge was at risk of closing altogether. Nobody knows exactly how many jobs would have gone if that had happened—20,000 jobs, perhaps more. Of course, it did not collapse. An alternative to Alchemy stepped in, in the form of the Phoenix Consortium. I will say a little bit more about that in a while.
The fact is, though, that Rover’s remaining in existence for the next five years bought the west midlands time to diversify, and to modernise its automotive and manufacturing base in a programme initiated by the Rover taskforce—and it worked. By the time MG Rover collapsed in 2005, job losses across the region were less than 10,000—less than half of what they would been five years before. However, people who lost their jobs in 2005 were still 100% unemployed; and if they worked for MG Rover, they lost pretty well everything, including their job, buying five years so that thousands of others in the west midlands could keep theirs. That is why there is still a debt to be paid to former MG Rover workers that has not been paid.
That brings me to the Phoenix four. They took over Longbridge on the crest of unprecedented public support. Given that we faced closure, or downsizing with Alchemy, what Phoenix offered made sense: stabilising the company; pricing products more realistically; looking for partners, or a partner, on whom the long-term survival of that company depended; and buying the regional economy the time it needed to adjust.
Getting a partner nearly worked, too. A deal with Shanghai Automotive Industry Corporation was so close towards the end of March 2005 that I was preparing to join the then Secretary of State at Longbridge at a press conference, to announce that negotiations over in China had been successfully concluded. It did not happen. Arguments continue to this day, and will no doubt continue for much longer, about why not. There is not the time now to go into theories about that.
I want to say something about the Phoenix four and what their stewardship of MG Rover involved. We now know, from the Department for Business, Innovation and Skills inspectors’ report, that the four had been engaged in creating a spider’s web of companies and deals that made them millions, but left employees utterly exposed when collapse came. They promised that Phoenix would be a stakeholder effort—that employees would have shares and a stake in the company—but the only shares they gave employees rapidly became worthless, while they kept profitable bits of Phoenix and related companies for themselves. Oh yes, and they even compensated themselves for giving worthless shares to their own employees.
Then there was the cruellest deception of all: the promise of a trust fund for the benefit of employees, which would divide up the assets of the remaining Phoenix companies if MG Rover collapsed. However, even as the Phoenix four were making that promise, they knew that they had taken money out for themselves from those companies and had effectively mortgaged what was left to the banks. Employees have never seen a penny, and the trust fund that was theoretically set up has now been wound up. Again, I say today to the Phoenix four—to John Towers, Peter Beale, John Edwards and Nick Stephenson—“Put your hands in pockets. Your employees did all you asked of them, and you owe them.”
Of course, the Phoenix four did not operate alone. The well known accountancy firm, Deloitte, advised them on many of their deals. That led to inquiries and eventually a fine of £14 million being imposed by the Financial Reporting Council—a record in the history of the FRC. Recently, Deloitte appealed and won some aspects of the appeal. No doubt its fine will be reduced, although we do not know exactly by how much. However, Deloitte was still found guilty on several other counts, particularly relating to conflicts of interest. One key aspect on which it won its case with the FRC was its contention that it is really too much to expect an accountancy firm to identify a broader public interest in such cases. My initial reaction was, “Have I heard that right?” If it is too much to expect Deloitte to take the public interest into account, does that not show that significant reforms to corporate governance rules are needed? I am working on some ideas in that regard with Aston university’s Professor David Bailey.
Looking back at MG Rover specifically, closer scrutiny by the Government of corporate governance arrangements set up by Phoenix—perhaps insisting, in the early 2000s, on having somebody on the board—might have helped to avert some of what the Phoenix four got up to in the meantime. Even if the Phoenix four continue to refuse to prise open their wallets, the Financial Reporting Council could show an example. Most of the fine payable by Deloitte, whatever it is, should go to former MG Rover workers and the communities that are affected, even 10 years later. It is an overwhelming moral case. Will the Minister think about that, consult colleagues and, I hope, endorse that request to the FRC?
Most MG Rover employees got other jobs within a year of the collapse. Some real success stories of individual employees came out of it, but many found themselves in insecure jobs, paid less than when they were at Rover. They were vulnerable when the financial crash came in 2008-09. Those who lived closest to the plant were often the worst affected. That says something about not only the dominance of one company in the Longbridge area, but longer-term changes happening in the south-west Birmingham economy. We see echoes of those changes in suburbs of other cities, too. Those changes have impacted on skill levels and aspiration, and ultimately they affect the life chances of people growing up there.
Yes, a lot of good work is going on—there is a renaissance in parts of the Longbridge area, where the development firm St Modwen is a major player—and yes, we even still make cars at Longbridge. Shanghai Automotive’s European technical centre, under the banner of MG, is based at Longbridge. Those things are good, but they are not enough. Shocking recent figures from the TUC show that my constituency is the worst blackspot in the country for the proportion of residents earning less than a living wage. Local people deserve better and they deserve more from the Government, whoever is elected in May.
Beyond the Longbridge area, the work that the Rover taskforce did between 2000 and 2005 was important in diversifying the regional supply chain. When Longbridge collapsed in 2005, the speed with which that taskforce was brought together again by the Government was impressive. It included the organisation of retraining, the re-engagement of former MG Rover workers in other parts of the automotive industry and in other industries, and the sorting out of problems with banks over car lease schemes, payments, benefits and redundancy issues. It sorted out mechanisms for emergency financial support for otherwise viable companies hit by major cash-flow problems by the collapse of MG Rover. It is still quoted as a model internationally, and the financial support packages devised in the west midlands in 2005 became a model when the general crash hit the UK in 2008-09.
As important as anything to the employees concerned is that when MG Rover collapsed in 2005, their pensions went with it. Were it not for the Labour Government’s pension protection legislation, which came into law just days before, many more ex-MG Rover workers would be facing poverty in retirement. The Pension Protection Fund did not happen by accident; active government made it happen. Will the Minister please learn lessons from that? Will he talk to colleagues at the Department for Work and Pensions to look again at whether the PPF indexing arrangements are as fair as they can be? Will he reflect on how the fragmentation of agencies, the way in which the DWP works today and the current funding of further education would all get in the way of developing the kind of response that there was in 2005?
Will the Minister do the MG Rover test on local enterprise partnerships? In the Greater Birmingham and Solihull area, we have a good LEP, but how many LEPs today could perform the central co-ordinating role that the regional development agency, Advantage West Midlands, did during the two Rover crises in 2000 and 2005? If the LEPs would not react with the same speed and efficiency in bringing partners together, we need to work out what needs to be done. Will the Minister reflect on that?
I leave the Minister with another request, which is to think about what the coalition Government’s employment law reforms would have done had they been in place when MG Rover collapsed. The company went into administration in 2005 and ultimately went into liquidation. There was no money in the pot for redundancy payments. It meant that employees had to apply through their trade unions to employment tribunals for protective awards to ensure that they could get their statutory payments for redundancy from the Government’s national insurance fund, and for protective awards to get even eight weeks of their contractual entitlements from the redundancy payments service. Thank goodness that the trade unions were there to help them with that, but thank goodness, too, that this Government’s employment reforms were not in place.
Under the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013, which was brought in by this Government, employees would have had to pay £1,500 even to issue a claim at an employment tribunal, and £5,700 to get their cases heard. A total of £7,200 would have probably had to be paid out to get the cases heard properly and resolved—paid by employees who had just lost everything. Guess what? Under the 2013 reforms, when the employer is insolvent, employees cannot get those fees back, even if they win their case, unless they get special dispensation. That cannot be right. Such situations can and do happen to other firms, including firms with no union to represent employees.
Even employees working in a small firm that went bust would have to pay more than £2,000 just to get their statutory redundancy pay and eight weeks’ contractual entitlements paid by the redundancy payments service, so will the Minister take a step back, think about that, and review that order and that law? I would like him to say that the 2013 order will be repealed, but even if he is not prepared to do that, I hope he will at least agree that the fees should be waived where an employer is in administration, receivership or liquidation. The MG Rover story is an example of where that could make a real difference to lives. The MG Rover story gives more than 6,000 individual reasons why the Minister should do that.
It is a pleasure to serve under your chairmanship, Mr Weir. I congratulate the hon. Member for Birmingham, Northfield (Richard Burden) on securing a debate on a matter that is of such painful importance to so many of his constituents and the communities he represents.
It is perhaps rare but also important that we do not just talk about what is happening today and over the next six weeks—it is easy for us all to become caught up in that—but that we look back at the past and try to make sure that we are always learning lessons from things that went wrong to ensure that they do not happen again. It is obvious that the collapse of MG Rover and the closure of the Longbridge plant was a devastating blow to the community and to the many thousands of people and their families who depended on the jobs they had in that company.
It is a matter of great regret that the people who took over MG Rover when there was an earlier threat of collapse did so without, frankly, proper intentions to build the company and secure its long-term future. Instead, they acted in ways that led to their disqualification as directors or managers of limited companies. Their conduct as directors was found to have fallen well short of the standards of commercial probity and the general conduct befitting the director of a limited company. Frankly, I hope that their part in such a shameful episode that caused so much pain to so many people, and such loss to the community that the hon. Gentleman represents, is a matter of great personal shame to the individuals he has named. I also hope that he agrees that the disqualification penalties that those individuals suffered were appropriate, but he is right to point out that they have not suffered financially in the same way that many of his constituents have. I completely understand why he and many of his constituents feel an abiding sense of injustice at the distribution of the penalties for the failure of MG Rover between those who ran it and those who worked for it so loyally for so long.
The hon. Gentleman referred to the Financial Reporting Council investigation into the action taken by the company’s auditors, which led to a fine that the auditors then appealed. He is right to say that the appeal is ongoing and it is not yet clear what fine will be imposed. He suggested that, when that fine is finally levied, the Financial Reporting Council should consider making the proceeds available in some form to the local community. He will understand that the Financial Reporting Council is an independent body established by the accountancy profession, so it would not be proper for me as a Minister to issue any direction or even guidance, but I will say that he made a very strong argument with which many people with a sense of natural justice will have sympathised. I have no doubt that, when the fine has been determined and is about to be levied, the members of the Financial Reporting Council will have heard him and will no doubt want to respond directly with their thoughts on the matter. I can think of no better use for such a fine than the one he suggested.
The hon. Gentleman asked about the Pension Protection Fund. I agree that it was a fortuitous fact for which we should all be grateful that the fund was introduced in advance—just—of the failure of MG Rover, so that many people were at least able to benefit from that level of protection of the lifelong savings that they had worked so hard to put aside. He also asked about the indexation rates. I am afraid I am not an expert on that, but I will encourage officials in the relevant Department to respond to him directly on his concerns about the indexation rates that apply in that scheme.
The hon. Gentleman asked how, had they been in force at the time, the current rules on access to employment tribunals would have affected his constituents following the failure of MG Rover. That is another subject on which a different Department, in this case the Ministry of Justice, leads. Nevertheless, he will know—and it is important that the public know, so that they are not unnecessarily afraid of the circumstances, should they become victims of a company’s failure—that people can apply for an exemption from or reduction of employment tribunal fees. That way, people with limited means are not excluded from seeking redress. About a third of applications for fee remissions by people making a tribunal claim are successful. He made a reasonable point when he said that one consideration in assessing such applications could well be the circumstances that had led people to go to an employment tribunal, such as the failure of a company in the manner he described.
I am grateful to the Minister for the spirit in which he is approaching the debate. I recognise that the matter does not fall under his portfolio, but my point is that although remission can be awarded, the problem is that it is all retrospective. People need confidence when they lose their jobs, not afterwards.
I understand the hon. Gentleman’s point. He referred to the role of trade unions. Perhaps to the surprise of some members of the Labour party, I am generally a supporter of trade unions, because there are occasions—he has outlined one of them—when they have a very important role representing their members and bridging any difficulties that they have in accessing justice. The hon. Gentleman is aware that the Government have announced a review of tribunal fees. I would not want to prejudge that, but he has made a powerful argument about how they might operate in circumstances such as those at MG Rover.
What I am about to say will not necessarily come as much comfort to the individuals who lost their jobs at MG Rover, because although many—indeed, most—found other jobs, the pain and loss that they experienced will never be removed from their memories. Nevertheless, it is important that we reflect on the wider success of the automotive industry, including some at the Longbridge site, as well as of the communities that the hon. Gentleman represents and the wider west midlands. It has been a remarkable feat, almost entirely the work of the people he represents. They have managed to pick up the automotive industry from a pretty dismal place and turn it into one of the most successful automotive industries anywhere in the world. Would that it had happened within the form of MG Rover and without the traumatic experience that so many of his constituents had to undergo, but I am sure that he too would like to thank and pay tribute to those who have managed to rebuild British car manufacturing to its current position and to celebrate the rapid growth in manufacturing employment in his constituency and the broader west midlands region. Long may it continue.
I am happy to do that. Revivals of this sort are never the work of one party or another; they are almost always the result of effective collaboration between far-sighted investors, hard-working and committed employees and trade unions that want to achieve success for everyone because that creates jobs and increasing wages. I am therefore happy to pay that tribute. We can all look forward to continued growth, more jobs, more exports and better wages for people working in the automotive sector and its supply chain in the west midlands.
Torbay (Economic Support)
I think this may be the first time that I have served under your chairmanship, Mr Weir. It is a pleasure to do so.
My speech today is not going to be a big whinge about what has gone wrong. In fact, I am going to praise the Government for many of the things that have happened, but I do want to talk a little about some of the problems facing my constituency that are not unique to it but shared by a number of coastal resort economies.
Many of our key tourist resorts exist as a consequence of two major developments: first, the coming of the railway, which made them accessible to large populations; and secondly, the social change of statutory holiday pay, which gave the working person a few days of the year when they could take a holiday, and in those days the train took them to our tourist resorts. Many of the problems faced by my constituency give us much more in common with Scarborough, Blackpool, Hastings and other tourist resorts than with other communities in the south-west—the region in which my constituency lies. The holiday resorts grew, with big investment in attractions such as piers, theatres, pleasure gardens and all sorts of things that the Victorians loved and cared for, but today that infrastructure is perhaps looking a little faded. I am grateful that this Government are the first to recognise that some of our piers should be funded. I will come to other things funded by the Government, but will also highlight some problems.
All our seaside resorts were hit very hard by the invention of the jet engine, which enabled the development of package holidays. Let us be honest, if people only have a week or two of holiday, will they go to where the sunshine is guaranteed or will they spend a similar amount of money going to a hotel in an English resort? Our English resorts are less likely to be people’s primary holiday destination. They are more likely to be a secondary destination for a short break. As a result, they have had to change their offer.
Other developments have taken place at the same time. Businesses in most of our seaside resorts were family owned. Small hotels and guesthouses ploughed their profit back into the area, keeping electricians, carpenters and others in work in the winter. Today, however, we are more likely to find brands and national chains, which take their profit out of the area; they purchase their food and services centrally and bring them in, so less of the tourism pound stays in the local economy. That is a real challenge for many of our seaside resorts—none more so than Torbay.
Conferences, which were becoming big business, have changed. Government money was invested in convention, conference and exhibition centres in our cities. Furthermore, conferences do not last as long as they used to, so an accessible location became more and more important, which has certainly hurt the coastal resorts on the periphery when competing with inland conference centres for important business.
If I am going to have a whinge, it is going to be a whinge over a period of time. For years successive Governments, whether Conservative or Labour, have tended not to recognise the problems of coastal economies. In the latter days of the previous Labour Government, they came up with a programme called coastal change, which involved a small amount of money to help, but in general terms my constituency in the periphery of the south-west, which is dependent on tourism, at a time of economic downturn has tended to go in early and deeper and to come out later.
The coalition has achieved a lot for my constituency. I will run through some things and the Minister, too, might refer to them. Perhaps the most important was the money for the bypass at Kingskerswell. Connections to the rest of the country are vital for all communities, but for one that depends on visitors that is doubly true. For more than 50 years we have wanted a better road link. One can travel from the Penn Inn roundabout to the north of Scotland without once leaving a dual carriageway or a motorway, but the last five miles from that roundabout into Torquay, a big urban community with a population of 137,000, is a single-track road. That was becoming a barrier—a barrier to investment and to businesses. When businesses based in our area wanted to grow, they would cite road links and move elsewhere. They would grow their business out of the area even though it had started in it.
The Government granted the money and Devon and Torbay councils came together with their contributions, so a dual carriageway will now open in November or December this year, we hope. Already that is having an impact. Businesses that in the past would have grown and moved out of the area are staying. Consequently, unemployment has fallen faster in Torbay than anywhere else in Devon. For the first time ever, we have been coming out of recession faster than other areas, rather than always being the ones to lag behind.
Other things have helped, such as the South West Water rebate. On privatisation, with 3% of the population having to fund 30% of the nation’s coastline, our water and sewage bills rocketed to meet the new clean water directives. The rebate of £50 last year, £50 this year and £50 next year brings us down closer to the national average, but still leaves us with higher water bills than most areas, although not the highest.
Broadband has come to Torbay ahead of most other areas. That is an important aspect of connectivity—not only physical links, but digital links are important. The broadband money that has come in ahead of other areas means that 97% of business addresses in my constituency had access to superfast broadband by the end of last year, although we still have 3% to go.
Assisted area status was taken away 15 years ago, but is now back. That is important to help businesses grow and to support entrepreneurial activity in the constituency. The coastal communities fund, which replaced the fund created by the Labour Government, is also important, although I have to say that it is too small a fund, given that it is oversubscribed.
The regional growth fund is important as well, although there is a real problem with it, and I wonder if the Minister will take this one away with her. The regional growth fund rests heavily on the private sector being able to lever in large amounts of money. An economic community that is mainly small, with few medium and no large businesses, cannot get such leverage so that it is able to compete with the larger inland towns for regional growth funding. I argue that we ought to take a small amount away from the overall regional growth fund budget and put it into the coastal communities fund. That would have a big impact on the ability of coastal communities to access funding to help their businesses to grow and regenerate their economies.
On convergence funding, we argued the case with MEPs and with Ministers and, at last, agreement was reached. The area has benefited greatly from European funds, so to be able to continue to do so has been vital. The Plymouth and south-west peninsula city deal linking in Torbay, in particular with mentoring schemes for young people who have been unemployed for a long time, is vital and long overdue, so I am glad it is happening. Furthermore, having such designations has enhanced our ability to access lottery funding, which historically we have not done as well as other areas in obtaining. Only the other week the Deputy Prime Minister announced £5 million for marketing Devon and Cornwall to overseas visitors, and that was very helpful.
More needs to be done, though. We need to diversify our economy away from its overdependence on tourism. We need three things, the first of which I have already talked about: connectivity, both physical and digital. Secondly, skills are crucial for businesses to be able to grow and expand in the area. We have good schools and an outstanding college but, sadly, too many of our skilled workers—our young people certainly—move away to fill market labour gaps in other areas. They cannot afford to live in Torbay, so affordable housing is the third thing—the missing link. We need to do far more on that.
Our tourism industry could still do with more support, certainly for skills training, to help schools and colleges to make tourism a more attractive option for work. Young people look at tourism and think, “Oh, I don’t want to be a waiter, make beds or do this, that or the other,” yet hotel and restaurant managers and chefs, for example, can earn good money and offer good careers. We need to get across that tourism has some good opportunities and lift the status of tourism in the eyes of school leavers.
Earlier this week, we had a debate in Westminster Hall on VAT and tourism, with the suggestion of a cut in VAT to levels similar to those in the rest of Europe. That would be worth up to £10.5 million a year to the Torbay economy, but it is not only an issue for coastal resorts. We tend to focus on them when we talk about tourism areas, but London and Birmingham need the tourist pound as well. They have new hotels and convention centres to help them get it, but a VAT cut could be just as important to them.
On education, as people in my area have low incomes, a lot of pupils qualify for free school meals, so we have done very well out of the pupil premium, but our overall funding for local government places us in the f40 group of local authorities whose underlying education grant does not reflect where our funding ought to be. I ask the Government to look again at the case made by the f40 campaign, for the sake not just of my own local authority but the other 39 that find themselves in that position.
I mentioned convergence funding. It is absolutely fantastic, but we need to match European funding. That is a difficulty for Torbay and other west country areas. In coastal areas, there are costs that tend not to be met by the local government grant. For example, if an area has a population that goes up two and a half to three times in the summer season, it needs more bins, which have to be collected more often, than it would for a much lower population; it needs more parks and gardens, promenades and car parking spaces, which all have to be maintained for 12 months a year, even though they will be used to capacity only for a short time in the middle of the year.
The local government grant is one subject on which I will have a whinge. It is not just my whinge; it is my Conservative-led council’s whinge and my elected Conservative mayor’s whinge—in fact, it is everybody’s whinge. We have had a poor deal from the local government grant. Although every local authority has had to suffer a reduction in cash, year on year, during this period of trying to get the economy back on track, the fact remains that we have not had the kind of reserves to dip into that other councils have. We hear quite often from Government, “Local government has billions of pounds of reserves, so that justifies us cutting local government budgets,” but some councils, mine included, simply do not have the reserves to cut into any more. There are predictions from my town hall treasury that the council could be bust within a few years unless something changes radically.
The only radical change there really could be would be to the grant system itself, if we looked again at the peculiarities of coastal resorts, which tend to have a high level of people on minimum wage, if they are in work, and of people who are welfare-dependent, as well as large numbers of older people and pensioners who are winding down economically. Areas need somehow to ensure that they can still provide the services that those people need and that still have to be provided when the grant is being cut.
Finally, I will talk about one feature of coastal communities that is becoming critical in my constituency. It is wonderful to have lots of older people. They are really important: they keep the voluntary sector, the local council and public bodies going because they can volunteer their expertise, knowledge and time, but in some communities the demographic balance has become too far skewed towards older people. That need not be a problem if there has been planning for the fact that there will always be that imbalance. The problem comes when the imbalance increases.
In the commercial market, there has been a move towards more and more accommodation for older people. The Minister may well know about this from her own constituency—the McCarthy & Stone and Peverel developments that come before planning committees, which see them as good investments that meet national targets on providing housing. Those developments provide housing for people who move in at the height of their earning capacity and who are often attracted from other areas by national advertising; often they come from areas that are capital rich, and can therefore use their purchasing power. That lifts house prices in the area they have moved to beyond the reach of people who would otherwise have found housing there—I will not use the term “local people”, but working people of working age. After people have moved into those developments, the demands on health and social care services increase. If a community already has a way above average number of people who depend on health and social care services and the balance is suddenly skewed even further, it is really unfair to the people who were already there to have to compete for those services, and the local authority—underfunded by the grant—will not be able to meet the need.
We need more people of working age, who are earning a living, paying taxes and making sure that communities are more balanced. That is not necessarily in the Minister’s power, but it should certainly be taken into consideration when looking at housing targets. They should not be seem only in numerical terms. It should be a case of meeting local housing need, rather than building nationally advertised lifestyle accommodation that in the long term creates enormous financial pressures and competition for services within certain communities.
My speech was not entirely a whinge, then. We have done well, in government and out of it, but we could do better, and I hope we will do so in future.
It is a pleasure to serve under your chairmanship for the first time, Mr Weir.
I congratulate my hon. Friend the Member for Torbay (Mr Sanders) on securing this debate, which affords me the opportunity to speak about the Government’s track record in supporting growth and creating jobs and to praise the businesses and organisations in his constituency. My experience from visits there is that the people are incredibly resilient and entrepreneurial. They have seized the opportunities the Government have provided to create jobs, improve growth and assist and improve quality of life. I have a soft spot for Torbay—it is the place of my birth—so I am delighted to take part in the debate.
The Government are committed to the devolution of power to the local level. That is not a one-way deal but a partnership: we have given local areas powers to drive economic growth, and in return we are asking them to show strong and accountable leadership and the ability to improve efficiency and outcomes in their area. Lord Heseltine’s independent report, “No Stone Unturned”, which was published in October 2012, recommended that more funding, freedoms and flexibilities should be devolved to local level to help places grow. That was a starting point for the unprecedented degree of devolution that the Government have achieved.
The Government published their response to the report in March 2013 and accepted its key proposal, which led to the creation of the local growth fund and growth deals. They represent a genuine revolution in how our economy is run. For the first time ever, housing, infrastructure and other funding are being brought together in a single pot and put directly into the hands of local authorities and businesses. That means local power to build stronger local economies, taking power and money from Whitehall and giving it to the people and organisations who know their areas best, and so know best.
Through growth deals, every local area in England is sharing money from the local growth fund to spend on projects that matter to their people and local economies. Growth deals have been made in all 39 local enterprise partnerships in England, with £12 billion available for the deals announced in July 2014. The deals have been allocated £2 billion from the local growth fund for 2015-16, and a further £4 billion has been committed for future years. The quality of proposals was excellent, and because of that, in some cases we have committed to funding projects over the long term, providing certainty and stability for local areas.
In the autumn statement, the Chancellor announced a further £1 billion worth of funding to be distributed through local enterprise partnerships. That funding has now been allocated to projects aimed at increasing economic growth around England, including in the hon. Gentleman’s constituency. His constituency has benefited considerably from growth deals made with Heart of South West local enterprise partnership. The hon. Gentleman touched on a number of those initiatives, including £3.4 million towards the Torquay gateway transport scheme, which will deliver road junction improvements and improved cycle links in the Torquay gateway area, much improving access into the town from the northern boundary; £400,000 to improve town centre access; £3 million for an electronics and photonics centre, based at Whiterock business centre in Paignton; a commitment to a new rail station and infrastructure; and £2.6 million of Public Works Loan Board funding to accelerate the delivery of 350 homes at Whiterock.
In the Budget today, the Chancellor announced a new enterprise zone in nearby Plymouth, which will be focused on growing the marine sector. That will be an important driver of growth in my hon. Friend’s LEP area, as businesses in his constituency in the supply chain will benefit. That is on top of an earlier £76 million investment in the south Devon link road, which he referred to.
We set up the coastal communities fund in 2012 in recognition of the unique challenges faced by coastal areas, as the hon. Gentleman said. In his area, £3 million of funding is going towards a new cycleway, which will put Torbay on the map for cycle tourism. To date, that funding has helped more than 320 businesses, supported 95 new business start-ups and created nearly 150 jobs.
Those opportunities would not be seized, taken up and made a reality without the drive and enthusiasm of businesses and other organisations in the hon. Gentleman’s local area. I saw that first hand when I visited the South West Coast Path Association, which had £1 million of coastal communities funding to safeguard nearly 800 jobs. I also visited Brixham Sea Works, a work hub developed with £1.4 million of coastal communities funding, focused on social enterprise and start-up businesses. It is benefiting from the investment in broadband that is also going into his constituency: Heart of South West will get 95% coverage and there were further announcements on broadband today.
The hon. Gentleman is right to touch on the older and ageing population of coastal communities and to point out the advantages that that brings. Next week, I will meet with Age UK to discuss how we can unlock some of that community’s potential. As he mentioned, they have tremendous knowledge and experience and our voluntary sector is propped up by them. They also have a tremendous amount of business experience that we can capitalise on.
On our care reforms, although they are not strictly in my brief, as well as helping alleviate the situation in which self-funders become reliant on state funding, we have also pushed for people to receive or be signposted towards independent financial advice when looking for a care home place or sheltered housing. That is sensible, because it is better for the individual, who gets advice, and for the local authority, which will not wind up with an enormous bill in future years. Our coastal communities are really embracing the opportunity. One community that has a lot of difficulties to overcome is Jaywick, but it has seen the care sector as the route to driving its economic growth. It is not just providing accommodation, but having a centre of excellence for innovation in the sector, providing jobs to the local community. It is a matter of seeing opportunities, not problems, and turning them into positives.
There is more to do. We recently set up the coastal heritage revival fund, which will be a fantastic catalyst. We understand the difficulty of unlocking private sector funding. Sometimes, with heritage assets in seaside towns, whether piers or lidos, we get a perfect storm. Perhaps the local authority does not want to get involved because it is worried about liabilities and the private owner does not have cash to put in, so a huge amount of community good will cannot be unlocked. That fund is designed to be a catalyst in unlocking that and helping those organisations, whether through charitable means, crowdsourcing and all that stuff or through levering in private sector investment. That is what the fund is there to do. I hope that we will see the coastal communities fund evolve and continue its good work.
The Minister has spoken a lot about peripheral funds. Sadly, Brixham and Whiterock are not in my constituency, but they are important to my constituents because many of them work there and there is a lot of interaction. She has not, however, addressed local government funding—the bread and butter, core funding for the area—which has gone down by 11%, 4%, 5%, 10% and, in the last year, by 17%. We have done well on the periphery, but the core funding has been reduced.
The hon. Gentleman anticipates my finale. We are clearly aware of the Barnet graph of doom, which years ago predicted that all local authority budgets would have to be spent on adult social care. Our local authorities are having to adapt. In today’s Budget, we had announcements about some areas getting 100% business rate retention, but we need to shift how we fund our local authorities.
Councils across the country have been doing a fantastic job in becoming more efficient, pushing more money to the front line and finding new ways of doing things. We have supplemented those pots of money with new initiatives. For example, the power to change fund, which will come on stream soon, will enable local people to pick up services that a local authority does not wish to continue. We must think of new ways of working. We recognise the additional challenges that coastal communities face, which is why we set up bespoke support and why they have the first ever Coastal Communities Minister.
From the work I have seen in the hon. Gentleman’s constituency and around the country, I know that local people have the resilience, creativity and drive to be successful. We need to keep listening to them, learning and sharing good practice, but I am confident about the future. The journey has just started; we have got to continue growth, creating jobs and sticking with our long-term economic plan.
Question put and agreed to.