1. This Report is published in the aftermath of the
worst financial crisis for 80 years. The collapse of financial
systems in this country and around the world has prompted much
study on how to make the financial system more resilient. This
Committee has played an active role in the debate about reform
through our reports and evidence sessions. Before the current
crisis, the financial services sector contributed substantially
to the economy with high levels of productivity, employment and
value added. While it is clear that the crisis should radically
change the way the sector operates, and that a return to business
as usual would be retrograde, the UK economy needs to build on
its comparative advantage in financial services, not jettison
2. If it is to prosper again, the financial sector
will need to draw on the best talent available, and to strengthen
its corporate governance. We began this inquiry because of concerns
that the City was failing
to use the talents of its female workers, and complaints of widespread
discrimination. It is a fact that on average women, across the
economy, earn less than men, and that men dominate top management
in almost every occupation. Nonetheless, the disparities between
male and female pay, and male and female career prospects appear
wider in the City than in many other sectors. While female board
members are far rarer in the private sector than in the public,
only 9% of the boards of FTSE 100 banks are female, compared with
12.2% across the FTSE 100 as a whole. 
Gender pay gaps also appear to be wider in the financial sector
than elsewhere in the economy.
Research conducted for the Equalities and Human Rights Commission
(EHRC) found that the gender pay gap in the finance sector was
greater than for the economy as a whole, on two different measures:
The gender pay gap for annual gross earnings
(i.e. all earnings, irrespective of hours) is 60 per cent, much
higher than the economy-wide gender pay gap of 42 per cent. The
gap at the other extreme, for hourly pay excluding overtime (i.e.
adjusting for differences in hours and excluding many additional
payments) is 41 per cent for finance and 21 per cent for the economy.
3. We recognise that gender pay gaps and an under
representation of women on boards exist in many sectors of the
UK economy. However, it appeared the disparities were greater
in the City than elsewhere. We accordingly decided to hold
two evidence sessions to explore the topic directly, and to attempt
to establish the effect that these disparities had on the city's
effectiveness, and its ability to access talent. In our first
session we took evidence from Ms Kat Banyard, Fawcett Society,
Professor Charles Goodhart, London School of Economics, and Dr
Daniel Ferreira, London School of Economics; from Dr Ros Altmann,
Ms Sandra Curtis, Ms Nichola Pease and Ms Clare Dobie, who shared
considerable experience of working at senior positions in the
City, and Ms Sharron Gunn of the Institute of Chartered Accountants
in England and Wales, Mr John Last of the Royal Bank of Scotland,
and Ms Cathy Turner of Barclays. In the second, we took evidence
from Trevor Phillips OBE and Baroness Prosser, the Chairman and
Deputy Chairman of the ECHR and from Rt Hon Harriet Harman MP,
in her capacity as Minister for Women and Equality, and Sarah
McCarthy-Fry MP, Exchequer Secretary, HM Treasury. We also discussed
this topic with Mervyn King, the Governor of the Bank of England,
Lord Turner, the Chairman of the FSA, Lord Myners, the Financial
Services Secretary, and Sir David Walker, and other witnesses
who appeared in connection with other enquiries. We are grateful
to all those who engaged with this enquiry, and to our advisor,
Karon Monaghan QC.
|Current Equality Legislation
The principle of equality is established in law. Women have legal rights to equal pay and equal treatment. Here we outline the legal framework which underpins much of the discussion later in this Report.
Two pieces of domestic legislation relate to gender equality. The Equal Pay Act 1970 is "an act to prevent discrimination, as regards terms and conditions of employment, between men and women". The Sex Discrimination Act 1975 prohibits direct and indirect discrimination in working conditions. Karon Monaghan explained:
The prohibition against direct discrimination means that it is unlawful for an employer to treat a women less favourably on the ground of her sex (by, for example, paying her a lower rate of bonus).
Indirect discrimination addresses rules that apply generally, but which have a disproportionate and unjustifiably negative impact on one sector of the community, such as working hours which preclude part-time working which have the effect of disadvantaging women employees (because of, most commonly, childcare responsibilities); companies can in principle insist on full time working, but they will need to justify such a policy. Ms Monaghan stated that:
It is now very difficult indeed to justify, in law, rules which require full-time (and preclude part-time) work.
Equality is also a long established principle in European Union law. The Treaty of Rome 1957 contained an article requiring equal pay for equal work between men and women (Article 119). Two European Directives (the Equal Pay Directive 1975 and the Equal Treatment Directive 1976) were enacted to achieve the requirements of Article 119; Article 119 has been renumbered Article 141 and now expressly addresses the principle of equal pay for work of equal value. The Directives have now been repealed and their provisions consolidated in the Recast Directive 2006/54/EC which requires Member States to outlaw both direct and indirect discrimination and to introduce measures addressing inequality in pay. Karon Monaghan told us that the two Directives:
required Member States to outlaw direct and indirect sex discrimination both in contractual and non-contractual pay and in respect of working terms and conditions.
In 2006 the United Kingdom framework was supplemented by the Gender Equality Duty on the public sector, which inserted a new section 76A into the Sex Discrimination Act 1975:
"(1) A public authority shall in carrying out its functions have due regard to the need -
to eliminate unlawful discrimination and harassment, and
to promote equality of opportunity between men and women."
Karon Monaghan described the meaning of "due regard":
The obligation to have "due regard" to the equality objectives in section 76A(1) is an obligation to have "proportionate" regard to the need to achieve those equality objectives [
The Gender Equality Duty gives specific responsibilities to public authorities to take ownership of gender equality in their work. This has specific relevance to public authorities with oversight and regulatory functions in respect of the financial sector.
The most recent relevant legislation is the Equality Bill, which has been carried over from Session 2009-10 and is now before the House of Lords. The Bill's remit goes beyond gender equalityit will harmonise and in some instances extend existing law on all types of discrimination. As to gender equality, it contains some measures which may have the effect of securing greater auditing of pay and inequality in pay and other benefits.
1 In this Report we use the term "the City"
to refer to the UK financial services sector. Back
Cranfield University School of Management, The Female FTSE
Board Report 2009, November 2009, p 19 Back
Q 156 Back
National Institute of Economic and Social Research, Employment
and earnings in the finance sector: A gender analysis, Equality
and Human Rights Commission Research Report 17, Spring 2009, p44 Back
Equal Pay Act 1970, introduction Back
Ev 88 Back
Ev 89 Back
Ev 88 Back
Equality Act 2006, s 84 Back
Ev 90 Back