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Our concern is that the causes of the gender pay gap are far from simple. Direct discrimination is clearly an issue, but many other very knotty and difficult issues will require careful addressing if we are to continue to erode and reduce the gender pay gap-and ideally at a
faster rate, as the hon. Lady just mentioned. The causes of the pay gap are well known, but let me quickly summarise and rehearse a few of them. Problems with flexible working are well known. There is no doubt that, if someone is trying to combine child care, for example, with work, it is essential that they achieve a proper work-life balance and that they be allowed and helped to do that by their employer, whether public or private sector. Clearly progress needs to be made in allowing and encouraging flexible working.
Child care is another issue. Affordable child care at the right time of day, on the right days of the week and in a convenient location, is essential for anybody trying to juggle family responsibilities with holding down a job. Repeatedly in surveys, the lack of suitable, affordable and conveniently sited child care comes up as one of the top two obstacles for people with family responsibilities to getting a job and, in particular, to remaining in it. The classic pattern is that someone manages to get a job and to get through the first few weeks, but the moment they first encounter something such as a school holiday, all of a sudden their existing child care arrangements are inadequate and they soon discover that they cannot continue to juggle those two important facets of their lives. Clearly, therefore, child care is crucial.
Equally, there is the perfectly legitimate element of individual choice. I am sure that everyone would agree that it would be entirely wrong for parliamentarians to dictate to families up and down the country what their work-life balance should be and how they should prioritise child rearing, for example, versus employment. We need to create an environment in which people can make their own decisions based on their personal lives and situations, an environment in which those decisions are backed up, made simpler and supported rather than obstructed. However, it is legitimate to say that it is perfectly possible for people to take structurally very different decisions. Women might on average take different decisions from men, and part of that, in a free society, is perfectly acceptable, providing that they do it of their own free will and for the right reasons, rather than being pushed, cajoled or pressured.
There are many different facets to gender pay discrimination and many reasons for it. It is not just me and other parliamentarians saying that. Some years ago, the Equal Opportunities Commission published a working paper, series No. 17, entitled "Modelling gender pay gaps". In it, it tried to break down the causes of the gender pay gap. It stated:
"Broadly, the research finds that gender differences in life-time working patterns account for 36% of the pay gap. Rigidities in the labour market, including those that concentrate women into particular occupations and mean that they are more likely to work in smaller and non-unionised firms, account for a further 18% of the pay gap. 38% is due to direct discrimination and differences in the labour market motivations and preferences of women as compared with men. The remaining 8% is due to women's lesser educational attainment in the past".
Thankfully, the latter gap is much reduced, and in some cases has gone the other way.
The EOC report talks about the full-time gender pay gap, which is down to 12 per cent. in round numbers. The implication of those figures is that 38 per cent. of the 12 per cent. gender pay gap in full-time employment is, as the report states, due to two factors:
"direct discrimination and differences in the labour market motivations and preferences of women as compared with men",
which we have just been talking about. There remains a systemic difference in this country between women with child care needs and men. In other words, roughly 5 per cent. of the gender pay gap is due either to direct discrimination or differences in labour market motivations. That means that the direct discrimination, which is the point of clause 75, and of obliging companies to publish gender pay differences, accounts for between 1 and 5 per cent. of the gender pay gap. That does not make it unimportant-it is potentially very important-but it is crucial for the purposes of the debate to understand the size of the issue that we are addressing.
John Mason (Glasgow, East) (SNP): I am concerned about the drift of the hon. Gentleman's argument, which has been to reduce to 1 per cent. the 22 per cent. gap quoted by the hon. Member for North Ayrshire and Arran (Ms Clark). Is the intention of that to weaken the rights of women?
John Penrose: Emphatically not. I am trying to ensure that people in Parliament and the world outside who might be watching have a sense of the size of the opportunity that this measure might help with. As I was explaining, there are many other causes of the gender pay gap-I am sure that everybody in the Chamber knows that-and those causes need to be addressed in other ways. Most of my other points about flexible working, child care arrangements and so on need to be addressed by other parts of Government policy and, indeed, through employer action.
We have just been talking about positive action. In laymen's words, I would argue that all the other points could, and should, be dealt with through positive action to help women to achieve their potential in employment.
Lynne Featherstone (Hornsey and Wood Green) (LD): Does the hon. Gentleman not see that the 22 per cent. differential relates to women in work, and that the other issues to which he referred are not a reason for that 22 per cent. still to exist?
John Penrose: The point that I am trying to make is that the pay differential is caused by all those different points. The EOC report stated that only 38 per cent. of the difference in full-time work-our debate depends on whether we are talking about part or full-time work-which starts from a base of 12 per cent., is due to direct discrimination or differences in labour market motivations. I am just trying to establish the size of the additional reduction that we could achieve by publishing gender pay information: it is at most 38 per cent. of 12 per cent. and quite possibly only a small fraction of that. The point that I am trying to make, therefore, is that there are other things that we could, and should, be doing. I am sure that everyone on both sides of the House agrees that many things need to be done to improve access to child care and so forth. The Government have attempted to do that, and my party has published its proposals to do so. All those other things are vital if we are to continue making progress in reducing the gender pay gap.
Lynne Featherstone:
The hon. Gentleman's argument very much minimises the size of the problem. I am concerned about 100 per cent. of the women who are discriminated against. There are other issues, but they
do not play a part in gender pay scales or their publication, whether in terms of women in full or part-time work. That differential still exists for those women.
John Penrose: I completely accept the hon. Lady's point that the differential still exists for those women. I am trying to break the figures down so that we can understand which bits might be due to direct discrimination by employers, which is the most pernicious piece of the gender pay gap and needs to be a determined focus of our aim of reducing that part of the gap. However, it is important for us to understand that, even if we reduce to zero direct discrimination by employers-that would be wonderful and something for which we should all aim-we will still have a gender pay gap, if we do not fix all those other things. According to the EOC's analysis, the majority of the existing gender pay gap will still exist if we do not sort out the other points. That is all that I am trying to get at.
The Solicitor-General: I am intervening now because we are debating a massive group of amendments and it is better to deal with specific issues as we go through it. First-and very quickly, of course-the pay transparency provisions are not about direct discrimination only. Every time the hon. Gentleman refers to discrimination, he completely misses out indirect discrimination, which is still a big component. We are not just looking for direct discrimination. With pay transparency, we will find things such as ghettoisation. In particular departments, there have always been women who have always been underpaid. If we get transparency there, so that we can see what is happening, we can delve into it and remove the problems. It is not about disclosing just direct discrimination; some of it will be indirect discrimination, and some of it will be nobody's fault. Business, the public sector and employees now understand that unless people are fair they will not get the best service from their employees. We are just trying to look at that. To be honest-and to put it neatly-the hon. Gentleman is barking up the wrong tree by trying to confine what we are doing to its impact on direct discrimination. He is missing the point.
Mr. Speaker: Order. It is always a pleasure to listen to the hon. and learned Lady, but I hope that that intervention, despite its incisiveness, will not be copied by others in terms of length.
John Penrose: The Solicitor-General is right that I have been focusing on direct discrimination up until now, and it is absolutely true that there are many other issues that responsible employers are already addressing and will need to continue to address. It is pretty unnecessary to have a gender pay reporting requirement to work out that every person in a particular department is a woman or that they are grossly over-represented in a particular department. One only has to walk into a department and look around to see that.
It is also true that the measures required to deal with some of the examples that the hon. and learned Lady gave, such as ghettoisation, are different. Such problems may require mentoring or help with career development, for example, which are the kinds of things that we addressed briefly in our discussion about positive action. Many employers are now undertaking such actions in an attempt to increase the proportion of women whom they first recruit and retain, and then help to progress
throughout their organisations. I hope that I am not barking up the wrong tree, because I think that those things are important. I was just seeking to get an estimate of the size of the opportunity that we are talking about.
However, there is agreement on the fact that it would none the less be worth while going ahead with a gender pay reporting requirement, even if we were talking about only a couple of percentage points of the pay differential. It would also be worth doing if the costs were proportionate. We are talking about a pernicious problem and an injustice that needs to be dealt with. Providing that we can deal with it in a way that is proportionate and sensible, we should get on and do so.
Ms Katy Clark: Another statistic from the report that the hon. Gentleman has quoted from is that 60 per cent. of women's employment is concentrated in just 10 occupations. Is not one of the issues that many of the jobs that women have traditionally chosen to do are undervalued? That is why we need to make the Equal Pay Act 1970 work, and also why we need the reporting provisions-and, I would say, other provisions-to strengthen equal pay legislation.
John Penrose: The hon. Lady makes an important point, which is akin to the point about ghettoisation. There might be different functions in a company or even entire sectors in which women have traditionally found it easier to get work. I would suggest that the reason for that will at least partly be the convenient hours that women can get in those sectors and the fact that they might fit more directly with the breakdown of time between child care and family responsibilities and work. However, that does not necessarily make what happens right. That is why I talked earlier about the importance of adequate child care, in order to give women more choices than they have had in the past, although publishing pay reporting figures is not necessarily the answer to that problem. Sorting out child care would be a far faster and, I would suggest, a far more robust response to the problem.
Gender pay reporting would none the less be worth doing if it were a trifle-something that would be cheap to do-and if we could thereby address the full-time gender pay gap of between 1 and 5 per cent., wiping it out or at least providing the information that would allow it to be wiped out. If gender pay reporting were that cheap, my party would be saying, "Well, this is a sensible and acceptable price to pay." However, the costs are causing me and many others grave concern.
In the Government's defence, the calculation has risen-I had a bit of a go at the Government about the issue in Committee. The House will be pleased to hear that the calculation has risen-it has nearly doubled, in fact. The Government say that the one-off implementation costs for large companies-those with more than 250 employees, such as Tesco, Shell or O2-have gone up from an estimated £92 per firm to £215.
1.15 pm
Ms Katy Clark:
Before the hon. Gentleman talks in any more detail about the costs of gender pay reporting, does he not accept that equal pay legislation has been in force since 1975? That is more than 30 years, yet employers have been breaking the law since then by paying men
more than they pay women. If it was any other area of society, we would be talking about taking action against those people in the courts. Why does he think that it is legitimate to discriminate in that way and that the state should not insist that we take urgent action to ensure that those people stop breaking the law?
John Penrose: I am afraid that I am very disappointed with that intervention, because I had hoped to make it clear, from both the tone and the content my remarks so far, that I think it essential that we should continue to make progress in this area. We have more progress to make, as the hon. Lady and I agreed in our earlier exchanges. What I am debating is how to do that and what the most effective way of doing it quickly is. In this case, I am also debating the best way of doing that in a cost-effective way-that is not to say that it is not worth doing anyway, but it has to be cost-effective and done in a proportionate way.
To return to my earlier point, the one-off implementation costs in the Government's impact assessment have gone up from £92 per company to £215, and the ongoing cost per company has gone up from £15.38 a year to £41. Under the new regime, therefore, Tesco or any other large FTSE 100 company will spend £215 to prepare for gender pay reporting and another £41 to do it annually thereafter. I do not think that I am alone in welcoming the fact that the Government have gone away and increased their numbers, but I fear that they have not increased them by anything like enough. Frankly, those numbers are still not even remotely believable. If we can come up with numbers that are believable and still proportionate, my party will take a very different approach, but we remain concerned and therefore seek the Minister's reassurance.
Gender pay is clearly important, but it is not the only source of pay differentials according to people's protected characteristics. There are not just gender pay differentials; there are also differentials on the basis of disability and many other protected characteristics. The issue is important, as I have said. However, if it is that important, we should be considering ways to erode those other pay differentials. We are concerned that by taking the sledgehammer to the problem that the Government propose, the wider issues will perhaps be ignored, or at least not given enough priority. I will now bring my remarks to a close. I look forward to the contributions of other hon. Members.
Lynne Featherstone: Let me start by dealing with the pre-employment questionnaires. We on the Liberal Democrat Benches welcome Conservative new clauses 21 and 22, which deal with prohibited pre-employment inquiries. Like new clause 11, they address some of the problems that people have before they even get into work. Whereas most of the Bill is concerned with discrimination in work, those new clauses deal with the barriers in the first place.
It was interesting to listen to the debate between the Labour and Conservative Front Benchers. I hope that they will reach an accommodation, because they both have right on their sides. The Conservative new clauses would firmly place the onus on employers not to make inquiries about a candidate's disability status. That is the most important point-the question should never be asked, so that there can never be an inhibition on
progressing, as opposed to being able to make a complaint only afterwards, whether the candidate has got the job or not.
On the other hand, the Government's new clause 40 seems to us to impose a slightly narrower restriction. For individuals to demonstrate that they did not get the job because of the pre-employment questions they were asked, there is a higher hurdle, making it more difficult to police and to prevent such inquiries. The merit of the Government's new clause is that there is a sanction and that a clear framework is set out for how an individual should seek a remedy when they have a complaint. That remedy, however, applies only if they did not get the job. The framework is welcome, but the narrowing is not. The Conservative position is nearer to that of the Liberal Democrats. Through this Bill, we are seeking to level the playing field-that is the point-and to give people the fairest chance of getting to interview without being subject to the potential prejudices of the employer.
That brings me to the Liberal Democrat new clause 11. Much of the Bill, as I said, is about what happens once people have got their job. On the basis of my experience of sitting on employment panels-I am sure other hon. Members have sat on them, too-as a local councillor for eight years in Haringey and for five years as an assembly member at the Greater London authority, together with all the anecdotal experiences and stories one hears, I have long been concerned that job applicants are being discarded at first sift either by the employer or by human resources departments. That prevents them from getting on to the shortlist and from being interviewed.
I also recall the case in my own office here when two interns, whose surnames were Hussein and Patel, applied for a job. They were far more qualified than me, I have to say, and they told me about the hundreds of job applications they had made without even getting through to an interview. They certainly felt that their names played a part in that discard.
From subsequent study and from thinking about the possibility of placing this new clause into the Bill, I have become aware of American research on brain patterns. It shows how when it comes to foreign-sounding names, it is the brain-rather than racism per se-that recognises and accepts what is familiar but subliminally and unconsciously discards what is alien or foreign. If someone is being interviewed by a racist, this is obviously not going to make a difference, but to be discarded, as my two interns were and as many others have been, simply because the brain works in a particular way seems to be a matter that we could and should look into.
When children are being examined, we give them a number so that they can write it on the paper and avoid any inherent bias. The proposition is that people applying for a job could use something like a national insurance number so that they could avoid being knocked out at first sift. That will not solve all the problems all the time, but it is an entry-level requirement. When one comes to interview, all is then revealed.
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