[Relevant documents: Correspondence between the Petitions Committee and the Minister for Small Business, Consumers and Labour Markets relating to ethnicity pay gap reporting, reported to the House on 27 July and 14 September.]
Before we begin, may I encourage hon. Members to wear masks when they are not speaking? This is in line with the current Government guidance and that of the House of Commons Commission. Please also give one another and members of staff space when seated and when entering and leaving the room.
I beg to move,
That this House has considered e-petition 300105, relating to ethnicity pay gap reporting.
It is a pleasure to serve under your chairmanship, Mr Hosie. I thank all right hon. and hon. Members for expressing an interest in this afternoon’s Petitions Committee debate. The e-petition is entitled “Introduce Mandatory Ethnicity Pay Gap Reporting”. Let me begin with the text of this petition, which states:
“Much like the existing mandatory requirement for employers with 250 or more employees must publish their gender pay gap. We call upon the government to introduce the ethnicity pay gap reporting. To shine a light on race/ethnicity based inequality in the workplace so that they can be addressed.
Currently there is a lack of data available in gauging the ethnicity pay gap in the workplace. Introducing these measures will allow employers to be held accountable in closing the gap where there is disparity. In order to achieve a fairer workplace publishing this data is one of the next steps to knowing how extensive the issues are from a race and ethnicity perspective and not just through the lens of gender.”
The petition closed with 130,567 signatures, including 355 from my Carshalton and Wallington constituency. At the outset of today’s debate, I thank the petition creator for taking the time to talk to me about why they started the petition. I also thank organisations such as NatWest, Lloyds and Barclays, which took the time to speak to me about their experience of ethnicity pay gap reporting in their own organisations—I will talk about that later. I also thank the independent statistician Nigel Marriott for his very helpful briefing note and his thoughts, which Members can view on his website.
There have been many calls in support of ethnicity pay gap reporting, and that request is not something new or born out of this petition; it has been around for some time. Reporting in March 2021, the Commission on Race and Ethnic Disparities also found that pay gap reporting is a potentially useful tool. But if we cast our minds back to 2018, when my right hon. Friend the Member for Maidenhead (Mrs May) was Prime Minister, she launched a consultation on this issue, and the stated aim of the consultation at that time was to help employers to identify barriers and enable a fairer and more diverse workplace. That move was welcomed at the time by both the CBI and the Equality and Human Rights Commission, along with businesses, charities, academics and others.
All of these, including the petition creator and those who briefed me prior to today’s debate, made the case that ethnicity pay gap reporting, much like gender pay gap reporting, could help businesses to understand their workforce better, identify barriers to equality and create action plans to tackle those barriers. And of course it would help to inform Government as to the reality of pay gaps and enable them to consider the actions that they can take if needed.
I am sure that colleagues from across the Chamber will go into greater detail about the benefits of pay gap reporting throughout their contributions, so I will not steal everyone’s material in my opening speech, but I would like just to draw attention to an example of an existing system of pay gap reporting in the UK, which of course relates to gender. In a blog post published by the London School of Economics in March of this year, it was found that gender pay gap reporting has been effective in its aim of narrowing the gap. The difference between men’s and women’s pay had shrunk by just under a fifth during the relevant time. It has affected employers because, according to the blog post, female workers
“show a strong aversion to high pay-gap employers, suggesting that organisations have felt compelled to make changes in order to attract and retain workers.”
One would hope that the same would apply in the case of ethnicity pay gaps. When speaking to some of these organisations, such as the three large banks that I mentioned in my opening remarks, it is very clear that this reporting has taught their businesses a lot and has helped to inform their action plans to create more equal workplaces. However, as the Government identified in their response to this petition, it is true that there are some complications to the reporting that will need to be overcome before proposals can be brought forward. Those have been very ably explained by Nigel Marriott in his briefing note, and I will touch on a few of them. I must stress that they are not arguments against ethnicity pay gap reporting, but an identification of what the Government will have to consider before making any proposals.
The first thing to mention is that, while it might seem easy to go straight to gender pay gap reporting as the template for ethnicity pay gap reporting, it is not as simple as replicating that, for several reasons. Gender pay gap reporting is supported by the fact that it is largely binary—not exclusively so, but given how big that discussion is, we will save it for another day—and more or less evenly distributed across the country, whereas the ethnicity breakdown in the population can alter drastically depending on where someone lives and can be made up of a much larger number of categories. That then presents a number of data protection issues, because data of that kind must never inadvertently reveal the identity of the person it reports on. For example, a small business in a predominantly white community could inadvertently reveal information about employees’ pay for just one of their employees.
Then there is the difficulty of how to disaggregate the data in the first place: what categories or descriptions should be used, and how do people truly reflect their employees’ wishes and how they prefer to be identified? That is made all the more difficult when we consider the issue of disclosure, as it is estimated that something between 5% and 40% of employees do not disclose their ethnicity.
Again, these are not arguments against ethnicity pay gap reporting, but it is important to raise these problems here and consider how we can overcome them in order to bring forward proposals. It may be that we look only to businesses with more than a certain number of employees, or report on an industry rather than at individual employer level. As my hon. Friend the Minister and I are both London MPs, I might suggest to him that London is the perfect place to trial such a scheme before rolling it out countrywide.
Either way, I hope the Government are considering this matter carefully. I note from their written response that they will look to publish their analysis of the 2018 consultation later this year, so any further information on the date of that publication and any plans to bring forward proposals would be very welcome. I will end my remarks there, Mr Hosie, and hand over to the rest of my colleagues.
It is a pleasure to serve under your chairmanship, Mr Hosie, and to follow the hon. Member for Carshalton and Wallington (Elliot Colburn).
It saddens me to say that structural racism still pervades and permeates our society. Over the decades, progress in addressing racial inequalities has been too slow, and we continue to see the impact of that in inequality in the jobs market, particularly towards those groups from minority communities. It should shame all of us to know that ethnic minorities in the UK are less likely to find career-type, sustainable work than their white counterparts, even when born and educated right here in the very same United Kingdom.
While we know that ethnic discrimination in hiring is pervasive and enduring, it is not clear how much of the labour market disadvantage experienced by ethnic minorities can be attributed to employer discrimination. Overall, just two thirds of black, Asian and minority ethnic people are in work in the UK—68%, compared with 78%, or nearly four fifths, of their white counterparts.
Once fortunate enough to be in work, black, Asian and minority ethnic people are also more likely to be in lower paid employment than their white counterparts, which largely reflects long-standing occupational segregation and often intersects with other characteristics such as gender and class. People from minority ethnic groups are over-represented in a range of lower paid jobs such as care workers, security, hospitality, customer services and taxi drivers.
Racial inequality in the labour market has persisted for decades. We all must play our part in addressing it, especially those of us in Government, and this Government can do more. For an example of the employment inequality divide, we need look no further than this city of London. Data gathered by the Office for National Statistics shows that minority ethnic employees in the capital earn 24% less than their white counterparts—quite a shocking statistic in the 21st century, in which we are to believe we live in an equal society. That statistic will only continue to increase without swift action by this Government.
We must introduce a mandatory reporting requirement, modelled on the 2017 gender pay disclosure requirement. That would be one of the most transformative steps a company could take to address racial inequality at work and overcome practical difficulties in the workplace. We have a Government with a very large majority, that have indicated their desire to build
“a fairer economy…ensuring the UK’s organisations reflect the nation’s diversity.”
Why, then, has it taken so painfully long for this Government to respond to a report that was commissioned in 2018, more than two years after they released their consultations on the plans? No further developments have materialised.
In Scotland, on the other hand, we have made great progress. In March 2020, a commitment was made by the Scottish Government to implement the key findings of the Scottish Parliament’s Equalities and Human Rights Committee. In doing so, the Scottish Government will take responsibility for assessing the prevalence of institutional racism, and proactively challenge and change practices that disadvantage minority ethnic communities and, more importantly, ensure those communities are involved in shaping that change. The Scottish Government of course recognise that taking these recommendations on board in no way represents a final step, but it is a step in the right direction and a step more than has been taken by this UK Government, or that they seem willing to take.
Pressure is now increasing on the Government, and an agenda for change was already set out in 2018 by the independent McGregor-Smith review of race relations in the workplace. That report showed a lack of access to training and promotion opportunities for black and ethnic minority employees. It also showed low numbers of top-paid black and minority ethnic employees, and high proportions of black and minority ethnic people in poorly paid jobs. We currently lack data with which we can gauge the ethnicity pay gap in the workplace. Introducing a mandatory reporting requirement will enable employers to be held accountable for closing that gap where there is disparity. Publishing that data is one of the next steps we can take to achieve a fairer workplace —something we all wish for—in order to know how extensive the issues are from a race and ethnicity perspective, not just through the lens of gender.
The Prime Minister has already faced criticism for saying:
“What I want to do as prime minister is change the narrative so we stop the sense of victimhood and discrimination”.
Perhaps if he had paid attention to the tragic and brutal killing of George Floyd, which led to widespread outrage and protest across the globe, he would realise that Governments are now facing increased pressure to remove the societal injustice faced by blacks, Asians and minority ethnic communities. In October last year in this place, I advocated for mandatory gender pay gap reporting. I am now asking the same thing of this Government: to deliver what they have already promised in their 2017 manifesto, and implement compulsory ethnicity pay monitoring.
It is a pleasure to serve under your chairmanship, Mr Hosie, and I congratulate my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) on having opened today’s debate. This is a really important issue, and I stand here in a somewhat privileged position as chair of the Women and Equalities Committee, because I have the opportunity to talk on a regular basis with those who seek to champion the rights of people with protected characteristics across the country.
Going back to when I was very newly in post, I remember a fantastic meeting that I had with a group of black female entrepreneurs. The first thing that they said to me was, “We must have mandatory pay gap reporting.” There was a very good reason why they wanted it to be mandatory: they had spoken to over 100 FTSE companies that all wanted to report, but were nervous about how. They were nervous about the metrics they should use and whether their ethnicity pay gap reporting would be comparing like with like with other comparable organisations, which is why those entrepreneurs said to me, “We need you to put pressure on Government. Unless it is mandatory, it will not happen in a coherent way, or in a way against which companies can be measured.”
The right hon. Lady is making some excellent points. Does she agree that, as well as an obvious equality imperative for the reporting, there is a really strong business imperative, and that the Government would do well to acknowledge that?
I absolutely agree with the hon. Lady. As we heard from my hon. Friend the Member for Carshalton and Wallington, some of the leading banks already do such reporting, but we wish to see other organisations doing more. Earlier this year, I was pleased to receive an email from Zurich, one of the country’s biggest insurers and the first insurance company to introduce ethnicity pay gap reporting.
There are no good reasons not to do such reporting, but there are reasons why it is complex. One of those reasons is the size of the business. With gender pay gap reporting, that is dealt with by making only the larger companies report, and I would argue that exactly the same should be instituted for ethnicity pay gap reporting: make only the larger companies do it.
My hon. Friend was right to point out that we do not want individual employees to be identifiable, so we need to find a way for the reporting to be done on an aggregated basis so that those employees do not have their personal salary details revealed. Just because something is difficult or complicated, that does not mean that we should not do it.
Gender pay gap reporting has shone a light, and as a result, that pay gap has been reduced inch by inch—perhaps I should say centimetre by centimetre, as that is all very topical at the moment. It has been reduced not as much as I would like—I would like to see it at zero—but we know there are also challenges around intersectionality. A woman in this world, in the 21st century, is still stuffed. A disabled person—or, heaven forfend, a disabled woman—has additional challenges. A black woman will have more challenges. It is time that we were honest about that.
As the hon. Member for Coatbridge, Chryston and Bellshill (Steven Bonnar) said, reporting needs to be data-driven and with granular data. We need massive amounts of detail to see which groups are the most adversely affected because, guess what, until we have accurately identified that, we cannot put in place the measures that will most help them and give them the equity that we all want.
The hon. Gentleman also highlighted something that my Select Committee looked at: the way that BAME people were affected by covid pandemic. We saw from evidence that they were disproportionately represented in public-facing roles in the care sector, in transport and in the NHS, for example. They had to interact with people daily, which put them at more risk. Those roles—particularly in care and transport—are poorly paid and insecure. Intersectionality is something that we have to scrutinise closely.
Ethnicity pay gap reporting is something that companies are crying out for. They want it to happen, but on a mandatory basis. I made that point to my right hon. Friend the Member for South West Norfolk (Elizabeth Truss) in her capacity as Minister for Women and Equalities, before she became Foreign Secretary. I hope that my hon. Friend the Minister will tell us whether we can expect an employment Bill in this Session, despite the fact that it was missing from the Queen’s Speech, because that strikes me as an ideal opportunity to introduce legislation on the ethnicity pay gap reporting that we are all calling for.
I recognise the challenges for small business when it comes to additional requirements from Government. I will not describe the reporting as a burden, because I do not think it is one. It will enable companies to look more closely at their own employment practices, and at leading organisations that have done it regardless of the lack of framework—although they would prefer it if there were a framework. I think it is an opportunity for us to look forward and drive down some of the basic structural inequalities that we still see in our country. I look forward to the Minister saying something positive in his speech.
It is a pleasure to speak in the debate with you in the Chair, Mr Hosie. I congratulate the petitioners on bringing the important issue of ethnicity pay gaps to this Chamber so that we can have a good debate about it. I have listened carefully, and thoughtful contributions have already been made. It is not easy, but we are all in politics—I include the Minister in this—not to do the easy thing but to put our minds to the more difficult stuff. Anybody can do the easy thing. I hope we hear a positive reply from the Minister.
Saturday marked the UN’s International Equal Pay Day. In the UK, women make 87p for every £1 earned by men. I mention the gender pay gap because all too often the gaps within the gap are overlooked. We must recognise how financial inequalities disproportionately affect some women in our society, including LGBT+ women and women with disabilities. The right hon. Member for Romsey and Southampton North (Caroline Nokes) mentioned intersectionality and the fact that one disadvantage plus another disadvantage increases the problems that people face. While women in the UK earn 12.5% less than men, ethnic minority women earn an average of 2.1% less than white women. We must ensure that women from all parts of our society are included in our efforts to close the pay gap.
I mention the gender pay gap because we have seen the effectiveness of mandatory gender pay gap reporting. I echo the right hon. Lady’s words about the importance of making it mandatory. Some companies are already doing it voluntarily, of course, but the real need is for it to become mandatory.
I am proud of the Liberal Democrats’ role in introducing that legislation in 2015, and of our first female leader, who fought hard to get it on the agenda in her time as Business Secretary. Before that legislation was introduced, only six companies published their pay gap data under the voluntary initiative. There is no doubt that the policy has driven greater transparency and accelerated progress towards workplace equality.
In contrast, statistics show that the ethnicity pay gap has not significantly improved over that time. Given that recent reports suggest that ethnic minority workers have been worst hit by job cuts during the pandemic, there could be no more pressing time for action. The McGregor-Smith report identifies a lack of transparency in corporate Britain as a key barrier to progress. Without data, how can employers identify the disparities within their own companies and make informed decisions that will improve their recruitment, promotion and management policies? Research shows that most employers believe that ensuring workplace diversity is a priority, but little more than a third actually collect and analyse data to identify differences in pay and progression for employees from different ethnic groups.
The voluntary approach has driven, at best, slow and inconsistent progress. Currently, only 13 FTSE 100 companies report their ethnicity data publicly. Government action is needed if we are serious about tackling the pay gap, its causes and its effects. As with gender pay gap reporting, there is a clear case for introducing mandatory ethnicity pay gap reporting. I ask the Government to set out a timetable for getting that into law.
Equality monitoring of the workforce is also an essential step to carrying out ethnicity pay gap reporting. I ask the Minister, when will the Government introduce legislation to ensure that all listed companies and businesses employing more than 50 people publish workplace data broken down by race and pay band? I have listened carefully to the difficulties, but let us tackle them, because the end result will be so much more positive for employers and businesses.
It is four years since the McGregor-Smith review, four years since the Government committed in their manifesto to ask large employers to publish information on their ethnicity pay gaps, and three years since the Government launched a consultation on ethnicity pay gap reporting. We are still waiting for the results of that consultation. The Government must stop dragging their feet. Only once businesses begin to publicly report the diversity of their workforces will we see the start of real change. As the Black Lives Matter movement showed, action is needed now to build a more inclusive and more equal society. Addressing race equality at all levels in the workplace can no longer be optional.
It is a pleasure to serve under your chairship, Mr Hosie. I am grateful to the petitioners for allowing us to have this debate.
As someone with a background in human resource management, I fully support the introduction of ethnicity pay gap reporting as part of the measures we need to tackle pay discrimination. Transparency is essential when we expect organisations to deliver a particular outcome. The Chartered Management Institute confirmed that 80% of managers surveyed agree on the need for mandatory ethnicity pay gap reporting for large organisations.
Fifty years of sustained effort to deliver gender pay equality demonstrate the importance of transparency. The Equal Pay Act 1970 decreed that men and women in the same employment, doing equal work, must receive the same pay. In 1993, the Pay Equity Project highlighted that women’s earnings remained significantly lower than those of male colleagues, due to factors such as undervaluing occupations with a largely female workforce and the effects of women’s generally greater caring responsibilities. Those factors were reinforced by institutionalised discrimination, such as by Glasgow City Council, which, after a decade-long battle by women workers and a change in administration, paid out more than half a billion pounds in compensation.
Even if direct discrimination is addressed, other factors will drive the ethnicity pay gap, and those can only be properly understood if the data is captured and analysed. The Office for National Statistics recently reported that in some circumstances, among recently recruited full-time employees, women might now be paid more than men. However, across the whole workforce and the employment cycle, women’s earnings remain below those of male counterparts. We have some way to go.
Despite that, the forces of reaction pounced. Bright Blue, which is backed by the new Secretary of State for what used to be the Ministry of Housing, Communities and Local Government—I am not sure of the Department’s new name—and others, says that the policy job on gender pay is done and we should now leave it to business. However, as with other things said by supporters of this Government, that is far from the case. The call for inaction in the face of continued inequality is all too predictable. In fact, the lesson to learn from half a century of pursuing gender pay equality is how enduring entrenched inequality can be.
We can also see the variety of tools and arguments deployed by those who defend the status quo or, as with this Government, wish to drag us back to an earlier age. I was disappointed, although not surprised, to see the findings on ethnicity pay reporting from the Cabinet Office’s hand-picked Commission on Race and Ethnic Disparities. The commission hid behind data complexity to make recommendations only for organisations that choose to publish figures—“If you think you are doing well, then tell us. If you are doing badly, you can keep that quiet.” The Government have seized on those findings, which stand in stark contrast to the meticulous work and recommendations of Lady McGregor-Smith, one of the few women of colour to head a FTSE 100 company, who got it bang on when she said:
“Until we know where we stand and how we are performing today, it is impossible to define and deliver real progress.”
She has been backed by Peter Cheese, the chief executive of the Chartered Institute of Personnel and Development, who said:
“We know that gender pay gap reporting has driven greater transparency and accelerated progress, and we believe the same is needed for ethnicity pay reporting.”
That is why the Government’s delay on this issue—including their failure to publish the responses to their 2019 consultation—is so disappointing.
The combination of Brexit and the pandemic has massively disrupted the world of work and there is more to come, including a likely spate of redundancies when furlough ends. Research by the Institute for Public Policy Research shows that ethnicity has been a major factor in the adverse economic impact of the pandemic. Unless we act now, it may also be a hidden factor in the distribution of reward during the recovery and beyond.
We already know that many on the frontline during the pandemic were among the lowest paid. Ministers have bandied the word “hero” about a lot, at the same time as presiding over the creation of a multi-tiered employment market where many more people stand to lose their status and rights as employees and be treated as freelancers choosing to work fewer hours. Others are simply under-employed and at the beck and call of zero-hours paymasters.
That multi-tiered workers’ rights policy is being used to argue that the labour market is too complex for ethnicity pay gap reporting to be effective—how convenient. Of course, if the Government brought forward their persistently delayed employment Bill, they could sweep away some of these anomalies and return to workers the rights enjoyed by previous generations. They will not, of course, because in addition to returning us to imperial measurements, Ministers want to see the rights of workers across large swathes of the economy revert to the 19th century. Instead of standing in line waiting to be picked for a day’s work, workers now anxiously wait for an email or text to say whether they have a shift.
Even before the pandemic, the CBI, the TUC and the Equality and Human Rights Commission were calling for ethnicity pay gap reporting to help us better understand and address pay inequality. Even the Investment Association recognises the benefits of mandatory ethnicity pay gap reporting as a means of helping businesses to demonstrate that they are generating sustainable long-term value. It also identifies lack of transparency as a barrier to change, highlighting that only 27% of FTSE 100 companies publish even the ethnic diversity of their board. That reinforces Lady McGregor-Smith’s comments on the lack of information from FTSE 100 companies available to her inquiry, and really it should end any pretence that significant progress can be made on a voluntary basis.
If we are to tackle the ethnicity pay gap, we need to do so from the root cause of much of the gap, which is continued discrimination. The UK Government need to take a leaf from the books of: Zara Mohammed, the general secretary of the Muslim Council of Britain, who has a laser-like focus on employment inequality; or the team led by Peter Hopkins of Newcastle University, who examined the experiences and perceptions of young Muslims in Scotland, some from my constituency—most young people from black and minority ethnic communities are proud of their Scottish identity, but that report left no doubt about the extra challenges they face, including in the workplace—or perhaps the Young Women Lead committee, supported by the Scottish Parliament, which examined the transition from education to employment of young ethnic minority women. Those are some of the voices that we need to hear on the issue.
We also need to see action. The difficulty, however, is that many of the powers to act on the issue are held not in Scotland, but here in Westminster. The Scottish Government are doing what they can to provide leadership, in stark contrast to the inaction of the UK Government. The Scottish Government will extend the requirement for Scotland’s public authorities to publish gender pay gap information to include disability and ethnicity reporting, and will ensure that the equal pay statement covers those issues. They are also developing an ethnicity pay gap strategy, supporting employers in Scotland to evidence how different communities are represented in an organisation across different pay bands. They will soon launch an immediate priorities plan setting out actions to tackle structural disadvantages faced by BAME communities, to act as a foundation for a long-term anti-racism programme.
Those are welcome actions, but I will draw to a close by repeating the words of Lady McGregor-Smith:
“Until we know where we stand and how we are performing today, it is impossible to define and deliver real progress.”
That is why we need the UK Government to step up to the plate, to deliver mandatory ethnicity pay gap reporting and to do so with the maximum possible coverage. Either that or they should get out of the way and pass the powers to the Scottish Government and let them make progress on delivering the fairer Scotland that we know is possible.
It is a pleasure to serve under your chairship, Mr Hosie. I thank the Petitions Committee for making the time for this important debate, and the hon. Member for Carshalton and Wallington (Elliot Colburn) for introducing it. I also thank the organisers of the petition. As the hon. Gentleman said, 130,000 people signed it, including 470 from my constituency.
I thank all hon. Members who contributed to the debate. The hon. Member for Coatbridge, Chryston and Bellshill (Steven Bonnar) talked about structural racism and its impact on society. The right hon. Member for Romsey and Southampton North (Caroline Nokes) talked about how reporting will not really happen unless it is made mandatory, and about her work on the Select Committee on how BAME individuals have been affected during the pandemic. That work shows issues of inequality. The hon. Member for Bath (Wera Hobhouse) talked about the effectiveness of mandatory reporting and gender pay gap reporting, and about how that has made a significant difference.
The past 18 months have brought a welcome focus on issues of race and ethnicity in this country and around the world, which is something I am particularly passionate about. In the context of the aftermath of the murder of George Floyd and the rise of the Black Lives Matter protests, we saw the petition take off. I mention that because ethnicity pay disparities do not exist in isolation; they exist within broader structures of racism that affect black and Asian minority people in every part of their lives. I have experienced it myself.
I have previously called for the Government to implement a race equality strategy and an action plan covering areas such as education, health and employment. I feel that would address the structural inequalities that exist. At the centre of that, I believe there must be action to tackle discrimination in the workplace, unequal access to training, finance and opportunities, and the ethnicity pay gap, which brings me specifically to this petition.
The petition calls for the introduction of mandatory ethnicity gap pay reporting. As the Minister will know, this is not a new suggestion or a new demand; people have been calling for it for some time. Can the Minister outline the Government’s proposals to address the suggestion? As the hon. Member for Bath said, the 2018 McGregor-Smith review into race in the workplace said:
“The Government must…legislate to make larger businesses publish their ethnicity data by salary band to show progress.”
We all know that the Government launched a consultation on this issue, which ran from October 2018 to January 2019. I am extremely concerned that we are yet to see anything published about that consultation some two years later. Can the Minister tell us what message that sends to black and ethnic minority people in this country? To me, it comes across that the Government do not particularly care about these individuals, because the consultation has been done and nothing has materialised from it.
I want to talk about issues with mandatory reporting that have been identified and how they can be overcome, but the delay is not about the practicalities of introducing mandatory reporting. Instead, the Government have gone cold on the idea. Despite the prolonged delay, this issue will not simply go away. We cannot settle for voluntary reporting. I hope that the Minister hears loud and clear that voluntary reporting is totally inadequate, and I will tell him why.
Just this week it was reported that only 13 of the largest 100 employers in this country have published their ethnicity pay gaps. As the hon. Member for Bath mentioned, this situation is similar to what happened before mandatory gender pay gap reporting was introduced in 2017. Prior to it becoming mandatory, a voluntary initiative led to only six companies publishing gender pay gap data, yet consultation shows that employers were generally supportive of mandatory reporting because it meant that all organisations would have to use consistent methods and be able to benchmark against each other. In this case too, only mandatory ethnicity pay reporting will deliver meaningful data from a wide range of businesses. This echoes conversations mentioned by hon. Members about the fact that we need to get the data.
A lot of businesses back mandatory reporting and conversations have been had. The CBI has joined the TUC and the Equality and Human Rights Commission in calling on the Government to go beyond the recommendations of the Commission on Race and Ethnic Disparities and bring in mandatory reporting without delay.
My hon. Friend will be aware that, without mandatory ethnicity pay gap reporting, we do not truly know the full scale of the problem. At the moment people say the gap is about 2.3%, but when we look at individual ethnic groups we see there is a gap of 16% for Pakistani groups and 8% for black groups. Does she agree that until this is made mandatory not only will we not know the scale of the problem, but companies will not take steps forward to address these inequalities?
I completely agree with my hon. Friend. Unless we get mandatory reporting, we will not know the full scale of this issue. That is shown by the fact that very few organisations, given the opportunity to do the reporting voluntarily, have taken it up. That leads me to something that I will discuss later—the stats that have been collated, which are quite alarming. We need to make reporting mandatory in order to be able to address the issues that are there—the inequalities that exist.
I want to address the report by the Commission on Race and Ethnic Disparities, which called only for voluntary reporting, and some of the practical issues that the Government have highlighted. The commission stated that
“many employers around the country simply do not have enough ethnic minorities for the recording sample to be valid.”
That is something I have heard in this debate, but leading experts in this field—including the Chartered Management Institute and the Chartered Institute of Personnel and Development—have set out practical ways to overcome it. Other concerns, such as the legal basis for collecting ethnicity information or low declaration rates, can simply be overcome with clear guidance from Government. Those practical issues are what the Government have been working on over the past two years, so the information is there for us to be able to do this, rather than kicking the issue into the long grass.
I want to end by saying something about why ethnicity pay gap reporting is so important. We know that, at national level, significant disparities exist between people of different ethnicities, as my hon. Friend the Member for Streatham (Bell Ribeiro-Addy) mentioned. In 2019, the Office for National Statistics found that median hourly pay was £12.49 for white people, £11.50 for black people and just £10.55 for people of Pakistani origin. The ONS study also found that people of Chinese origin earned on average £15.38 an hour and people of Indian origin earned £14.43. That really should lead us to caution against making sweeping statements about ethnic minorities as a whole, but there is clear evidence that people’s race and ethnic background determines how much they earn, and I have seen that at first hand. Sadly, for many people, the colour of their skin, along with their gender and class, determine the opportunities that are open to them. That is something that we really need to change.
I wanted to mention the interaction between race and other characteristics such as gender. A report was done recently by the Fawcett Society, which found that ethnic- minority women are
“almost invisible from positions of power across both public and private sectors”
in the UK. We see that around us. We know that a range of connected factors determine pay disparities. They include age, location and, of course, gender and race. It is for precisely that reason that we need to build up more data on those disparities, as my hon. Friend the Member for Streatham mentioned. Company-specific reporting is important, because it obliges employers to examine their data and to work out why disparities might exist. It does not assume that discrimination takes place, but rather provides information so that employers can make informed decisions to improve recruitment, promotion and pay policies. Without it, we will not be able to see what progress has already been made and where there is more to do.
Let me conclude. To fight discrimination, we must first see it and understand it. The Government have dragged their feet on this issue for far too long. The consensus for mandatory ethnicity pay-gap reporting is broad and the arguments for it are compelling, so I would be grateful if, when the Minister responds to the debate, he would tell us what the Government will do to bring forward legislation to implement this vital measure.
It is a pleasure to serve under your chairmanship, Mr Hosie. I congratulate my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) and the Petitions Committee on securing this debate on a really important issue. I am sure that we can all agree that it has been an interesting and informative debate, and I am really grateful to everyone who has contributed.
My hon. Friend the Member for Carshalton and Wallington did an excellent job of opening the debate, as one would expect of him and of a member of the Petitions Committee. As you may know, Mr Hosie, I served on the Petitions Committee for a number of years, and I know from personal experience how important and valuable its work is. My hon. Friend set the scene in a very balanced and comprehensive way and demonstrated the complexity of the issue, showing that it is not simply a binary one. There are a lot of concerns and possible unintended consequences, which I will explore in a second, and we need to put those into the mix in order to make sure we get our consideration of this subject right.
Petitions are a great way to ensure that we do not overlook issues, and that we in Parliament, in Government, and in my Department consider the matters that are of most concern to the people we represent. Today’s debate is no exception to that: the petition was signed by over 130,000 people, including 322 people in my own constituency of Sutton and Cheam, which is testament to the interest there is in ethnicity pay reporting as a means of achieving a fair workplace. I understand that the petitioner, who is here today., the many people who signed the petition, and the MPs who spoke today and others are really concerned that the Government have yet to publish their response to the 2019 consultation on mandatory ethnicity pay reporting. Clearly, the past 18 months have not been what any of us were expecting, but I want quickly to set out the journey we are on in regard to ethnicity pay reporting, giving some background and explaining some of the issues we are juggling as we consider how best to take things forward.
First, I should make it absolutely clear that the Government are committed to building back better from the pandemic, and building back fairer in doing so. People from all backgrounds must have the opportunity to achieve their potential, and a key part of building a fairer economy is ensuring that our businesses and other organisations reflect the nation’s diversity from factory floor to boardroom. That is essential to our levelling-up ambitions.
We know that we face challenges in ensuring equal access and fair representation for people from minority ethnic backgrounds in the workplace, and that we need to do so much better. Although they are improving, employment rates for ethnic minorities continue to be lower than they are for white people. The evidence also shows that once in work, people from ethnic minorities progress less and earn less money than their white counterparts, but the picture is complex, and outcomes vary substantially between ethnicities and by gender within ethnic groups. For instance, over two in five Pakistani or Bangladeshi workers are in the three lowest-skilled occupations, but Indian people are the most likely of any ethnic group to work in the highest-skilled occupations and have the highest average hourly pay.
I said that I would set out the journey that we are on. In 2016, as has been mentioned, the Government asked Baroness Ruby McGregor-Smith to examine the barriers faced by people from ethnic minorities in the workplace, and to consider what we might do to address them. One of her recommendations was that the Government should legislate for mandatory reporting and ethnicity pay data by £20,000 pay band. The Government’s response said that they were persuaded by the case for reporting. Baroness Ruby McGregor-Smith’s report highlighted the fact that equal participation and progression across ethnicities could be worth an additional £24 billion to the UK economy annually, but that we expected businesses to take the lead in reporting voluntarily.
In 2018, the Government commissioned a “one year on” report, which showed that, disappointingly, limited progress had been made. Just 11% of employees reported that their organisations collected data on ethnicity pay. Given that fact, we consulted on mandatory pay reporting in the same year. That consultation sought views on the benefits of monitoring and publishing ethnicity data; what might be reported; and what contextual information should be provided, such as narrative, action plans and ethnicity data classifications. The responses to that consultation raised a series of issues, showing that establishing a standard ethnicity pay reporting framework would be considerably more challenging than was the case even for gender pay gap reporting. There are genuine difficulties in designing a methodology that provides accurate figures and allows for interpretation and meaningful action by employers, employees and the wider public.
To give Members one example, we would expect the Department for Business, Energy and Industrial Strategy to be leading from the front when it comes to all things relating to workers’ rights in business. The Government website talks about civil service pay and says that
“of civil servants whose ethnicity was known, Asian and White staff had the lowest average annual pay (£27,200), followed by Black staff (£28,400), staff with Chinese ethnicity (£29,500), and staff from the Mixed ethnic group (£29,600), with staff from the Other ethnic group having the highest (£30,000)”.
The problem is that the average median annual pay for all of the civil service was £27,100—£100 lower.
Anyone with a basic grasp of statistics would say, “It’s not possible to have every ethnic group that is recorded above the average median pay for the entire civil service”. That is because 22% of the civil service did not identify, which is clearly skewing the figures. That is just one of the anomalies, or unintended consequences. It is not something that we cannot get around, but it is illustrative of how statistics can be misread and a problem misdiagnosed.
This is the civil service as a whole. What I am saying to my right hon. Friend is that the figures are clearly skewed by that 22%. We want to get accurate reporting, but everybody, according to this, is above the average median pay. That cannot be the case; that is not possible. If the figures have been skewed, we cannot diagnose the problem from them, so we must work through those figures and work through a methodology, so that we can ensure that we have robust figures.
I am interested in what the Minister is saying. Can he clarify something: are the Government working through that methodology? What specifically are they doing, and when do they expect to have a system in place that does take account of the complexity that we all acknowledge but which absolutely must not get in the way of our making progress?
I am grateful to the hon. Lady for letting me progress with my speech, because that is exactly the point that I was coming to.
We have continued to work with businesses and other organisations better to understand the complexities identified through the consultation. More recently, we have been working with the Business in the Community app and race at work charter members. My right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) spoke about people and businesses crying out for reporting. The number of charter members is currently 700, which is up from 300 this time last year, so there is clearly a big push of people signing up to the charter. One of the points in the charter is to collect data on ethnicity and the ethnicity pay gap. This work has looked particularly at action planning and what participating organisations believe to be the key drivers of the ethnicity pay gap: culture and leadership; recruitment; retention; and progression.
In parallel, earlier this year, the Commission on Race and Ethnic Disparities published its report, setting out a road map to racial fairness in the UK, which made an important contribution both to the national conversation about race and to the Government’s efforts to level up and unite the whole country. In the report, the commission pointed to the statistical and data issues that could affect ethnicity pay reporting and suggested a voluntary approach. It made a further recommendation:
“The Commission recommends that all employers that choose to publish their ethnicity pay figures should also publish a diagnosis and action plan to lay out the reasons for and the strategy to improve any disparities. Reported ethnicity pay data should also be disaggregated by different ethnicities to provide the best information possible to facilitate change. Account should also be taken of small sample sizes in particular regions and smaller organisations.
To support employers undertaking this exercise, the Commission recommends that the Department for Business, Energy and Industrial Strategy (BEIS) is tasked with producing guidance for employers to draw on.”
The information that the Minister has provided is very helpful, particularly on the work that Business in the Community has done and also his quoting the report from the Commission on Race and Ethnic Disparities. I would be grateful if he clarified exactly what the Government have done since they conducted the survey and consultation in October 2018. I have heard what organisations have been working on, which is fantastic, but I would really like to hear what the Government have been working on to address this issue.
The Government are clearly working towards this and I will continue developing that journey in my speech. What we want to do is to make sure that we are delivering on something that is possible. What I do not want to do is what the Leader of the Opposition did last week, by talking about setting a £10 minimum wage, then this week advertising for stewards for the Labour party conference and paying £9.75 an hour. Politics is the art of the possible. We must ensure we get this right and that we diagnose and solve the problem correctly.
As I said at the beginning of my response, I am developing that journey covering the last two years’ worth of work if the hon. Lady will remain patient. The hon. Member for Coatbridge, Chryston and Bellshill (Steven Bonnar) talked about racism, and clearly we need to ensure that we tackle racism in all its forms. However, the Commission on Race and Ethnic Disparities found that most of the disparities when tackling ethnicity pay do not have their origins in racism. There are other factors that may be at play, such as geography, class, sex and age. However, whatever the cause of the pay gap, it is essential that we get organisations to tackle this.
The Minister said the issue is not about racism. He also conceded that the data that has been received is not very clear, because a number of different groups are not actually reporting. How can he be so sure that the issue is not racism when the small amount of data he does have shows there is a difference between the pay of ethnic people and their white counterparts?
I think the hon. Lady is mixing up two things, because the data I talked about was specific to the civil service. It was specifically to make the point that we can read different things out of statistics. What I was quoting about racism is not my view necessarily; it is the view of the report by the Commission on Race and Ethnic Disparities, which was tasked with looking at this and other issues. We are committed to taking action on ethnicity pay reporting, but we want to ensure we are doing the right things to genuinely help move things forward. Determining what it makes sense to report on and what use that data may be put to is key. It is far from straightforward.
The commission’s report and our post-consultation work with businesses and other organisations identify a wide range of technical and data challenges that ethnicity pay reporting brings. First, there is the challenge of statistical robustness. In 2019, the Royal Statistical Society argued for a minimum sample size per category of at least 100 to draw valid conclusions. Its purpose was to ensure that the calculation of a pay-gap statistic would be reasonably reliable when interpreted by non-statisticians, who would not likely be able to appreciate or measure the extent to which the statistic is affected by random chance.
The second challenge, as we have heard by my hon. Friend the Member for Carshalton and Wallington, is anonymity. It should never be possible to identify any individual from ethnicity pay-gap analysis. That means a sample size must be large enough so that it is not possible to link a number of individuals of the same ethnicity to a particular pay band. The third challenge is data collection and business burdens. A study of more than 100 organisations by PwC in August 2020 found that almost 35% did not collect any ethnicity data, with half identifying legal and GDPR requirements as barriers to collecting the data. Among the organisations that did collect data, around half said they would be unable to publish their ethnicity pay data due to poor or insufficient data driven by low response rates.
Fourthly, there is reporting on a binary basis. One way to mitigate low employee declaration rates is to combine all individuals from an ethnic minority background into a single group for reporting purposes. However, such an approach risks masking the significant variations in labour market outcomes between groups and therefore the relevance of any action plan. Finally, there is the challenge of skewed results. Reporting at a more granular level risks results being skewed by particularly large or small pay values because of low numbers of particular ethnic groups. If an employer with 300 people employs black individuals in the same proportion as the wider population—3% of England and Wales’ working population is black according to the Office for National Statistics—then their average pay would be calculated from just 9 individuals, and that assumes 100% declaration rates.
The uneven geographical distribution of specific ethnic groups complicates the issues further. In Wales, only 0.7% of the working-age population is black. It is therefore much harder to produce reliable and actionable statistics from relatively few data points. All this create complex challenges when deciding how best to take forward ethnicity pay reporting, but the Government are determined to take steps to help employers tackle race and ethnic disparities in the workplace. I think we would all agree that key to this endeavour is obtaining a good understanding of the issues that may be driving the disparities and, most importantly, developing meaningful action plans, based on that understanding. The Ruby McGregor-Smith report, the Government’s consultation on ethnicity pay reporting, and the commission’s work all make an important contribution to both the national conversation about race and the Government’s efforts to level up and unite the whole country.
The Government are now considering in detail what we have learned from the consultation on ethnicity and pay, our further work and the commission’s report. We are assessing the next steps for future Government policy, and we will set out a response in due course. Once again, I thank hon. Members who have contributed to the debate. It has been a valuable discussion.
I thank all right hon. and hon. Members for their contributions to this Petitions Committee debate, and I thank the petitioners for allowing us the opportunity to discuss this important topic this afternoon. The key theme in a lot of Members’ contributions was the importance of getting good data and creating evidence-based policy as a result, which is absolutely what we want to see. Of course, skin colour should not be a predeterminate of pay, and that is what we all want to see tackled in this country. I look forward to hearing more from the Department about the response to the consultation and the next steps, as I am sure the petitioners do.
Question put and agreed to.
That this House has considered e-petition 300105, relating to ethnicity pay gap reporting.