The recruitment of skilled personnel is normally taken very seriously. It takes time and commitment and involves searching for suitable candidates, sifting applications and interviewing. This will be no different with the new employment status. In fact, companies will need to take time to consider whether this type of contract is right for them. The owner of a company offering the status should think about the impact of giving up equity in the company. This is a decision that is not easily reversed, as once you have given away your shares it may not be easy to get them back. We must remember that the owner is giving away a stake in the company. Companies will need to be sure that the person to whom they offer the contract is right for the company. An employee shareholder may be able to influence the decision-making of the company and

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take a share of the profits. This is not something a company would do without being sure that it was the right move for them.

The new status will not be applicable or suitable for all companies or all individuals but it might be right for some. This new employment status represents more choice for individuals and companies. I have been clear throughout our debates that the status is voluntary. Indeed, it may well be used only by a minority of companies, but what is important is that we allow them to choose what is right for their own personal and commercial circumstances.

Lord Lea of Crondall: My Lords—

Viscount Younger of Leckie: I hope that I may be allowed to finish. I urge the House to keep this innovative proposal as part of the Bill. We should not deprive individuals or companies of choice that may lead to more jobs and better company performance. Above all, it is good for growth in the UK. I beg to move.

Motion B1

Moved by Lord Pannick

As an amendment to Motion B, leave out from “House” to end and insert “do insist on its Amendment 25”

Lord Pannick: My Lords, on 20 March, your Lordships’ House voted by a majority of 54 to exclude Clause 27 from the Bill. The reasons of principle and practicality as to why your Lordships’ House so voted remain valid. They were not altered by the vote of the House of Commons last week. Indeed, the debate in the House of Commons, which was limited by a timetable Motion to 45 minutes, barely addressed, let alone answered, the concerns which were expressed on all sides of this House on Report.

I remind your Lordships why your Lordships’ House voted to exclude Clause 27. I want to do so because the noble Viscount’s speech conspicuously avoided, if I may respectfully say so, all the concerns which the House expressed on Report. I commiserate with him because he has been asked to defend the indefensible.

The first point is that Clause 27 frustrates the very purpose of employment rights. We can, and do, disagree around this House and in the other place as to what the content of employment rights should be. That is entirely proper. They are debated and amended from time to time as we see the balance between employer and employee and as we perceive the public interest. However, over the past 50 years all Conservative and Labour Governments have recognised that an employer and an employee cannot be allowed to contract out of those employment rights which Parliament has seen fit to guarantee. That is because it would defeat the very purpose of conferring those employment rights. They are conferred precisely because freedom of contract—a voluntary agreement, as the Minister describes it—does not protect the worker or the job applicant who lacks basic bargaining power. To allow basic employment rights to become a commodity to be traded in the way

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that Clause 27 proposes would frustrate their very purpose. We would not envisage for a moment allowing a manufacturer of goods to contract out of his, her or its obligation to the consumer simply because the latter chooses, voluntarily, to pay a lower purchase price.

The need for protection in the employment context is most obvious in the case of the person who is seeking employment. The Minister in the House of Commons, Mr Michael Fallon, emphasised last week that a Clause 27 agreement is voluntary. The Minister repeated that statement today but, as he accepts, the employer may under Clause 27 advertise the vacancy on the basis that it will be filled only on Clause 27 terms. In the real world, outside the House of Commons, a person who is offered employment on Clause 27 conditions only is not voluntarily accepting such conditions. In the current economic climate, he or she will have no practical choice. I welcome the fact that the Government have removed one aspect of the unfairness of Clause 27—that is that a person refusing work on Clause 27 terms would have lost jobseeker’s allowance; a quite extraordinary position—but the fact that the Government have removed the most outrageous aspect of this proposal does not mean that what remains is acceptable.

The first objection is that the clause proceeds on a theory of voluntary agreement that frustrates the very purpose of conferring employment rights and is wholly unrealistic. The second objection is the damage that this clause will cause. A number of noble Lords from the government Benches—I repeat, from the government Benches—made this point on Report and in Committee far more powerfully than I could hope to do. The noble Lords, Lord Forsyth of Drumlean and Lord King of Bridgwater, both of whom served as employment Ministers, the noble Baroness, Lady Wheatcroft, the noble Lord, Lord Deben—all of whom I am very pleased to see in their places—and other noble Lords on the government Benches explained, from their extensive business and political experience, just how damaging it would be to industrial harmony to allow employers to buy off basic employment rights, how no sensible employer would consider this to be beneficial and how Clause 27 would do enormous damage to the cause of promoting employee share ownership. I am very sorry indeed that the Government have chosen not only not to listen to this House but not to listen to the wisdom and experience on their own Benches. The Minister must know that there is not just a lack of enthusiasm for this measure on his own Benches, there is a positive hostility to it that makes the Government’s insistence on pursuing this cause and this clause, in the word used by the noble Lord, Lord Deben, in Committee, “mystifying”.

The third objection to Clause 27 is that even the case which was advanced by the Government in the House of Commons last week does not begin to justify the broad scope of the clause. The Government’s case, as expressed last week by Mr Fallon, is that Clause 27 will encourage new and small high-tech companies which will be more willing to employ people with special skills. Even if noble Lords were to accept that assumption—and it begs a large number of questions —it would justify only a specific and narrowly drawn statutory provision tailored to the specific circumstances

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which are said to justify its enactment. The generality of Clause 27 inevitably means that it will be used and it will inevitably be abused by the Gradgrinds of this world. This concern was expressed on Report by the noble Lord, Lord Forsyth of Drumlean, in his powerful speech against Clause 27.

5.45 pm

My fourth and final objection to Clause 27 has already been raised this afternoon and is that the clause contains no provision for independent advice. The Government have refused to accept that statutory rights should be lost only if the employee has received advice from an independent adviser on the legal and financial consequences of the agreement. These consequences are inevitably complex and the suggestion that jobseekers can simply go off to lawyers or accountants and get advice on these matters, as the Minister suggested this afternoon, is quite unrealistic. As the noble Lord, Lord Forsyth, has already mentioned, Parliament has, in Section 288 of the Trade Union and Labour Relations (Amendment) Act 1992, required independent advice in the context of compromise agreements to settle employment disputes in individual cases in employment tribunals.

The Minister simply has no answer as to why independent advice is a statutory requirement before a compromise agreement is reached in a tribunal but no independent advice will be required before the employee signs away these employment rights altogether. This is a major decision for any employee, especially when there is, of course, no guarantee that the shares will increase, or even hold, their value. Indeed, if the company is making employees redundant, which is the context of this clause, it is highly likely that the shares will be worth less than £2,000 or nothing at all when the individual is made redundant. This concern was expressed by the noble Lord, Lord Myners, earlier in this debate.

For all these reasons, Clause 27 frustrates the purpose of employment rights and is damaging to industry. The Government’s own case does not explain why we need so broad a provision and there is no requirement for independent legal or financial advice. I invite your Lordships’ House to stand by its principled objection to Clause 27. The Government and the House of Commons have simply failed to address the concerns about this clause on all sides of the House. They should be asked to think again about this important matter. I beg to move.

Lord Forsyth of Drumlean: My Lords, I hesitate to follow the noble Lord, Lord Pannick, who has set out very clearly and persuasively the points that we discussed before and which are causing concern to the House. I share his concern about the Commons debate, which, as he indicated, was guillotined. All the serious points that were raised in this House have not really been addressed by my noble friend. I exonerate him from any blame in that respect but they are important points. Many of them may be slightly peripheral to the substance that we are discussing here, which is about employment rights, but, for example, I remain concerned as to whether the estimate made that this could result

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in more than £1 billion disappearing in tax-avoidance schemes is correct. It is not clear to me whether the Treasury has found ways of ring-fencing this scheme, which provides for up to £50,000 of capital gains tax to be relieved, and whether this could not be used as a great tax-avoidance scheme.

I got a call this afternoon from a Mr Mark Florman of the British Venture Capital Association, who wanted me to know that all his members were absolutely behind this scheme and very much supported it. I said to him, “Why are they concerned about a scheme that enables people to give up, in effect, only their rights against unfair dismissal if they have been employed for more than two years and can have £2,000 worth of shares, tax-free? What conceivable interest can that be to the membership of the British Venture Capital Association?”. He said that it was keen to encourage share ownership and for employees to be involved in share ownership. I am sure that people on all sides of this House are keen on that concept. That is why I would strongly support any schemes that encouraged share ownership. However, this proposal mixes up two things—one is employment rights and the other is share ownership. It is not at all clear to me how it would be beneficial to either employers or employees to embark on this scheme.

Being a reasonable, moderate sort of fellow, I looked at where we had got to in this debate, and I looked at the vote in the House of Commons, where the majority was actually somewhat less than the Government’s majority. I looked at the short-term nature of this matter and thought, “Is it possible to find a way of making this look not more sensible but more practical?”. It seemed to me that the Government could have done two things. One was, as the noble Lord, Lord Pannick, pointed out, to ensure that people who were embarking on an employee shareholder contract were given independent legal advice that the shares were worth what the employer was telling them, on what the arrangements in respect of the valuation of the shares would be at the end of the period, and on what employment rights they were giving up and the consequences of that. That seems to be an entirely reasonable suggestion. Regarding the idea that people on low incomes can go and get legal advice on these matters or that issuing and putting values on shares in private companies is straightforward, I have to say to my noble friend that the entire investment banking industry is based on the premise that the valuation of shares is not straightforward.

There is also the idea that by giving people shares in return for employment rights the employee is in a negotiating position. However, they want a job and are not in a position to say no. Even if the provision was that the employer may provide legal advice at the request of the employee, that would not be enough because the thought would be, “It’s going to cost the employer £1,000 and if I say I don’t need the advice, I might have a better chance of getting the job”. The fundamental point was made by the noble Lord, Lord Pannick: the reason that we have employment rights—while I think they go too far in some respects—is that they even up the position between the employer and the employee. I am not particularly persuaded on this.

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However, I thank the Government for at least taking up one point, which is to alter the guidance in respect of the jobseeker’s allowance. I was grateful to my noble friend for the letter that he sent us, but I have to say that amending the guidance to say that people who refuse to take up this voluntary agreement would not be found to be intentionally refusing employment is not a concession; that was just a mistake by the Government that they have now corrected. It is not right to present this as a concession. The concession that is needed is to protect the position of the employee against the unscrupulous employer, and independent advice is part of that.

My other thought was that the Government say that this proposal will be of interest to small firms. Some people suggested to me that there could be an exemption stating that the measure would apply only to small firms. However, on reflection, I do not think that that is the issue at all. This is a general provision for employees, and whether it is a big firm or a small one is not the key issue here.

I am also worried that my noble friend said in his opening remarks that it will not be easy for employers to get the shares back, but in his own guidance he makes it clear that these schemes can include a provision that requires the employees to give the shares back. What is the deal here? It is: “You give up your right to be protected against unfair dismissal. We will give you some shares that we tell you are worth a certain value, but you have no idea whether or not we are right, and when you get those shares you have to pay tax and national insurance on them if their value is more than £2,000. Then at the end, I, as your employer, if I decide to sack you, can take them back at a valuation that may be less”. That does not seem to be a scheme that will set the nation alight with people wishing to participate in it.

I have to say to my noble friend that this thing is not thought through. Not only that, but to those of us who have tried to be constructive—I was prepared to go along with this today if the Government showed some sensitivity to the concerns that have been so elegantly expressed by the noble Lord, Lord Pannick, and others—the Government seem determined just to railroad this through and not deal with the arguments. I, as a Conservative, perhaps a Thatcherite Conservative, am not identified particularly with employment rights, but I am proud that it was a Conservative Government that first introduced them because we recognise that there has to be a fair balance in the labour market.

I therefore say to my noble friend, can he not think again and at least offer us a concession in respect of the right to have independent legal advice paid for by the employer whose initiative this is, so that the employee is in a position to know exactly what they are being asked to sign up to?

Lord Flight: My Lords, I cannot match the advocacy of either the noble Lord, Lord Forsyth, or the noble Lord, Lord Pannick, but I feel that there is a saddening negativity towards these proposals. I am glad that everyone agrees.

A lot of the issues raised in this House have been addressed—in particular, the concern, which I completely supported, that it would be a nonsense if people were

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forced to give up the ability to claim their jobseeker’s allowances if they turned down the offer of an employee shareholder job. That is the most important issue of the lot. But there are other important issues where the proposals have been improved. I see the situation in the context of a half-way house between self-employment and standard, typical, large-corporation employment.

An interesting survey has been published by the RSA which finds that more than 30% of people in their 20s now want to be entrepreneurs, self-employed individuals who will have no protection rights whatever. In terms of giving up rights, there are three important areas, including unfair dismissal rights—which are not given up as regards improper grounds such as discrimination—rights to statutory redundancy pay, and certain rights to request flexible working hours and time to train. People retain a whole lot of other employment rights and the issue is not, by a long chalk, about giving up all your employment rights.

Of the concessions that have come from the Commons, the most important is that the Secretary of State will have power to regulate the buy back of shares. That does not amount to legal advice, which would be nice, but it does afford a protection there. I suggest that, in practice, what will happen if any businesses embrace these schemes is that there will be the usual sort of standard formula. If there is a buy back by the company, then there will be a prescribed price earnings multiple, or such like, on which to value them. That will unfold as time passes.

6 pm

A new right has also been introduced for employees not to suffer detriment if they refuse to agree to an employee shareholder contract. This means that if an employee has been overlooked for promotion or disadvantaged in any other way because of that refusal, they can present a claim to an employment tribunal. If this happens to a self-employed individual they have absolutely no protection. A new unfair dismissal right was created to ensure that if an employee was sacked because they had refused to accept an employee shareholder contract, this would be regarded as automatically unfair and they could present a claim for unfair dismissal to an employment tribunal.

Other practical issues came up in this House concerning whether shares would be fully paid. It is quite important that shares awarded to employee shareholders now must be fully paid, so that a situation could not arise where, if the shares were not fully paid, an employee shareholder would be liable for a balance relating to the value of the shares.

Employee shareholders cannot be asked to provide any other form of consideration apart from agreeing to become an employee shareholder for the shares issued to them under the scheme. The upper limit has been effectively increased, although I repeat the point I made twice before, which is that I think the limit of only £2,000 at which the shares granted become a taxable benefit is too low. To return to my reference to the RSA survey, this scheme typically is for people who are high risk-takers working for smaller companies and who do not feel the need for the protection.

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Lord Forsyth of Drumlean: I am most grateful to my noble friend. I agree with his point about the tax allowance. If someone is awarded shares in the way that he has described and the value of the shares is, say, £20,000, will they then be liable to pay the tax and national insurance on that? Where will they find the money from?

Lord Flight: That is the very point that I made when we last debated the issue in this House. That is why I think the £2,000 limit is too low. The response to that is that it obviously depends on their tax rate. If people are accepting £10,000 worth of shares they may be able to find the tax which might be of the order of £2,000 to £2,500 on that award. It entirely depends. I also make the point that in more traditional entrepreneurial circumstances, which was my own experience, I had to put up the money myself and I had to remortgage my house to raise the money to start a business. I would like to see the limit raised, and I think for the scheme to work it will need to be raised, but we should not overstate the tax burden.

Lord Forsyth of Drumlean: I am most grateful to my noble friend. Does that not then mean that the value of the employment rights you are giving up depends on how much money you are able to find in order to buy the shares?

Lord Flight: First of all, it depends on what is on offer. It is broadly for the company to decide the amount of employee shares that it is going to offer under this scheme. To repeat the point, the employment rights which are being surrendered, particularly as viewed by ambitious entrepreneurial types, are not perceived as of particular value. The grant of free shares is of value and, to the extent there is a tax bill, I wish it were lower, but the tax bill is not entirely outrageous. I suspect that the tax limit will be raised in due course.

It is easy to be negative and to pick holes in what has not yet been fully addressed. I would like to see some of the improvements that noble Lords have suggested. But I think to take a rather superior view of, “Oh, no, we really don’t want this”, is wrong. I think it should be given a try and the issues that need sorting out will be sorted out. There are substantial numbers of ambitious young people for whom the objective is not to work for the Civil Service or to work for Shell or Unilever and to have a secure job with a generous pension, but to have equity in the businesses they work for, to make that business work and to make their equity worth a considerable amount of money.

Lord Monks: My Lords, unfortunately, I was unable to be present at Report stage, but I was struck when I read in Hansardthat the House of Lords was doing its job like it perhaps does not do enough in an admirable and exemplary non-partisan way, looking at the practicalities of this proposal, not looking for negativity but simply giving it some forensic examination, which has clearly not been done by many in the Government and many who supported it in the other place.

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This proposal about shares for rights is implausible. It is difficult to see too many people showing any significant interest in it. If we want to abolish red tape, well, just look at this proposal. It is full of red tape. I believe it is also objectionable—the idea that somehow you can sell your rights or trade in your rights. It is very clear which rights you will lose. It is a lot less clear, for all the reasons that have been stated, what employees will get and how those shares will be valued.

The proposal is also perverse. In the Report stage debate the noble Baroness, Lady Wheatcroft, set out one example. If matters do come to redundancy, will the employer decide to get rid of those with shares who have given up their redundancy pay or those to whom the employer will have to pay redundancy pay? It could well be the employee shareholder who is first out of the door.

The advice that the House of Lords gave to the Government has been treated with contempt. It has just been brushed aside. That includes the advice given by distinguished former Conservative Employment Ministers who are loyal on nearly all occasions, but not on this one. That is not being negative. That is not looking for negativity. It was good advice that was given, it is good advice that is being given now and I hope that this time, if the vote goes the right way from the point of view of those of us who are critics, it will be listened to with a little more concern and consideration than it got last time.

The noble Lords, Lord Pannick and Lord Forsyth, have ably pointed out the fallacies and flaws in the proposal and I will not repeat those. However, I do not think that many employers will give it much of a second look unless there is some tax advantage which will no doubt come to light in due course. Some unscrupulous employers will do so and that is where the individual worker would need some source of independent advice about what they agree to and what they do not.

I find the position of the Business Secretary in this matter intriguing. He fought a battle against the Beecroft proposals, but let us remember—I am no fan of the Beecroft proposals—that he did not propose taking away rights to compensation for redundancy. He was talking about a single payment. It seems to me very strange and disappointing that the Liberal Democrats and the Business Secretary have let this clause slither through the processes of government in the interests no doubt of a deal with the Chancellor of the Exchequer. I hope for the Liberal Democrats’ sake that it is a good deal which compensates for their disgraceful agreement on this matter. I hope they will think again in the time that we have available and put this clause where it really belongs, which I believe is in the nearest recycling bin.

Baroness Warnock: My Lords, noble Lords may be somewhat surprised that I speak on this issue, but it so happens that I have spent a great deal of the past few months looking into employee shareholding and employee ownership and have had long discussions with Charlie Mayfield, who, as noble Lords know, is chairman of the John Lewis Partnership. He was consulted about this proposal and simply regarded it as laughable.

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What kind of firms did the Government really have in mind when they invented this farrago—it seems to me—of nonsense? I believe that they had in mind the smallish high-tech firms that set up outside Cambridge, Oxford, Bristol and so on. They thought that all the people employed by this kind of firm were going to be high-tech experts and graduates of their local universities and that the company would be inventive and innovative and, when it got bigger, would probably sell itself off, having made a profit. I do not think, when this was invented, that the Government had in mind that large companies would really have any interest. In fact, I remember that on Report the Minister was reduced to saying, “Well, the good thing about this is that not very many people will take it up”. That seemed to be an extraordinary argument in favour of it. Does the Minister really think that this will be an option open universally to businesses, including retail and manufacturing ones, or is he still thinking, as I am sure the Government were at first, of these very small businesses where everyone starts off more or less equal—equally well educated, intelligent and able to get legal advice—and is anyway probably in it for the interest of the thing and its short-term life? Can the Minister answer that question?

Lord Deben: My Lords, the noble Lord, Lord Pannick, very kindly reminded the House of my words at an earlier stage, in which I used the expression “mystification”. My concern is that I start from rather a different position. I think that a kind of package could be put together that would represent that midway point between someone who was self-employed and someone who was fully employed, particularly in dealing with the kind of company that the noble Baroness, Lady Warnock, has just pointed to; indeed, I thought that was the intention. I am dismayed because I do not want to remove the possibility of a sensible experiment that would enable small firms, in return for shares, to recognise that, to use a phrase, “We are all in it together”. That seems perfectly respectable.

I could not go along with what was being proposed, as a matter of principle, until the change that has now taken place. I thought it unacceptable that someone should lose their jobseeker’s allowance because they had not entered into what ought, right from the beginning, to be a different kind of arrangement, which would have to be voluntary. I do not agree with the noble Lord, Lord Pannick, that, because the job would be advertised in this way, somehow or other it was not voluntary. There are lots of jobs that people decide they are not going to take because of the terms under which they are presented. I do not find that objectionable.

What I find so difficult with the Government’s proposition is that it seems that it will not work. Frankly, it does not matter much what we decide on this because I do not think anyone is going to take it up and I do not think it is going to happen. That makes me sad—not for the reasons of the noble Lord, Lord Monks, but because I actually think that there is a place for a system that would enable a partial involvement in the beginning of a small company, which would of course mean that you took some cognisance of the fact that it was a pretty rocky position and in return you got some sort of special

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advance. However, at every turn, we find that it does not quite work like that. All along the line, the sort of things that we might have liked do not seem to work out—not least, as my noble friend Lord Flight described, when it comes to the problem of how you pay for things and how you organise that. You begin to realise that this does not have the enlivening, enlightening and opening effect that the creators of this idea obviously thought it would have. I am not driven to the extremes of feeling that this is ghastly and awful thing, because I just do not think it is going to be taken up.

6.15 pm

I am very saddened by the fact that this is not the package that I think the Government intended to produce, which puts me in a very difficult position. If I vote in favour of the amendment, then we do not have anything at all. If I vote in favour of the Government, we have something that I do not think will be taken up. I find myself in an awful position, which is rather close to being a Liberal Democrat. I have spent my whole life avoiding that position so it is an extremely difficult one for me to take, and I have not yet decided precisely how I am going to emerge from this. I say to my noble friend, first, that he has worked valiantly with the material that he has—talking about bricks and straw would demean the triumph that he has established. We have the removal of the thing that made this absolutely unacceptable and some improvements on the margins that my noble friend Lord Flight has put forward.

I make a last-minute plea to the Minister. As long as you get rid of the extremists on both sides—those who would have nothing and those who do not really like employment rights at all, who I think cancel each other out fairly satisfactorily—a position could be created here which would be about share ownership in the circumstances of a joint contribution to the sort of risky endeavour that every new company is and every new high-tech company certainly is. That is the position that I think the Government were seeking to place, but I do not think that they have done it. I do not want to say to the Government that we do not want any of it, but I would have hoped that the Government could have gone a lot further in listening to the advice of people who did not wish them ill but wanted to find a better way through this. Although they have removed a thing that made it, in my view, impossible to support, I am not sure we have gone far enough along the lines that we ought to have in order to make this—

Lord Woolf: I apologise for interrupting and thank the noble Lord for giving way. However, does not everything he has just said, which I have listened to with great care, indicate that this is one of those situations where legal or financial advice from somebody competent is critical?

Lord Deben: The noble and learned Lord, Lord Woolf, puts me in the most difficult of positions. I have spent my whole life congratulating myself on being the only politician from Cambridge of my time who was not a lawyer, and therefore complimenting lawyers, or suggesting the need for legal advice, goes against the grain in a big way—but I have to say that he is right. However, that is not the only thing. The

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issue is how we make this a creative contribution to the development of small businesses rather than something that has become an argument not about that at all but about giving up employment rights, the need for legal advice and all those things. We did not start from the basis that we ought to have, which is what puts me into this huge position. I apologise therefore for not being enormously supportive. I still have to listen very carefully to decide quite how unsupportive I am going to be, but I say to my noble friend that I wish we could have turned this good idea into a good idea instead of turning this good idea into what seems to me to be largely not an idea at all.

Baroness Turner of Camden: My Lords, there are already in existence what I suppose you could call partnership schemes, where people can of course have shares and a partnership with a company without the necessity for the abandonment of employment rights. As this legislation stands at the moment, one cannot help feeling that this is a way in which the Government want to get rid of employment rights without appearing to do so by introducing a scheme under which the employee can be persuaded to voluntarily give up an employment right where they normally would not consider doing so because that would not be required.

I do not think that we can judge this on the basis that “We ought to have a scheme where people do participate”. Schemes like that are available. What is difficult about this is that the basis seems to be the abandonment of employment rights before the employee can get involved in any sort of share or partnership scheme. I think that that is what we object to very strongly; I, at least, have done so from the very beginning. It has always seemed to me that the Government themselves are not keen on employment rights. This is a way of getting rid of those rights without appearing to do so, simply by offering an employee something that really does not compensate for the loss of the very important employment rights that we have been discussing today. It is that sort of basis which is why I oppose this clause and why I fully support what the noble Lord, Lord Pannick, has said with great clarity. This is the situation that I take now, and I hope that the Government will be disposed to accept what we have said on this side of the House—indeed, on every side of the House—which is: do not proceed with this scheme. Not only will it not work, but it is not right and it does no good at all to employment and employment rights.

Baroness Brinton: My Lords, I want to start by thanking the Government for the concession on jobseeker’s allowance candidates and the fact that they will be not penalised, but I have to also agree with other colleagues on both sides of the House who have admitted that this is really the rectification of a mistake rather than a major concession. However, it is essential. It is critical because before it, any of the guidance to the DWP and Jobcentre Plus offices would have been unusable and unworkable for this system, and would have put candidates for such jobs at complete peril.

I am also pleased—I will not go into detail about this, but want to refer to it—that throughout the passage of this Bill we have consistently talked about

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the necessity of independent legal advice. That is not just for those who are currently unemployed and are being sent to interviews by Jobcentre Plus; it actually applies to anyone. I think of a young 23 year-old that I know who has just joined a high-tech company in Cambridge where I think hardly any of the employees do not have at least one degree and most have at least two. However, if you asked that 23 year-old about the way shares work, he would not understand them at all and would clearly need advice as well. Helpfully, the firm that he has joined has made sure that any new employee who gets access to the share scheme gets that advice, so there are some good examples around.

However, if this scheme does not offer that advice where there is an element of two tiers of employment, that means that such advice must be made available. Frankly, I agree with the noble Lord, Lord Pannick, and others who say that it is on a par with the formal legal advice required for compromise agreements.

Following the debate in the Commons last week, I shall focus on the Minister’s referral yet again to this being suitable for small high-tech companies, particularly in university areas and high-tech areas. Confession time: in the 1980s I was a venture capitalist, spinning ideas mainly out of universities, although not only Cambridge University, and that is one of the reasons why I have quite a lot of experience and knowledge of what is happening in those companies now.

It is quite clear that good, small high-tech companies already use employment share schemes, or share schemes for all their employees who come in right at the start. The reason why they do this is that they know it is going to be a very hard road to make the product successful, particularly if it has not even been developed yet. They know that as time goes on further rounds of money will be coming into the company, and that they will be diluted not just once or twice but to a very minimal amount. Therefore, £2,000-worth of shares on day one, which for argument’s sake might represent 10% of a brand new company, might actually end up being a tiny percentage once you have had three, four, or five rounds of venture capital and hedge fund money going in. As a result, an employee will have to wait a very long time before they see any benefit.

Again, having to pay for those shares up front is not just an issue for those who come from unemployment; it is an issue for those coming in at a very low starting salary who, in addition, have to give up their employment rights and are being told, quite frankly—in Cambridge, which I know quite well, everyone freely admits this—that it is extremely unlikely that you will see any return on any investment in the first 10 years of a high-tech company. If you do, then it is a real star and is to be applauded. However, the vast majority, 95% of firms, do not do that, and 90-plus% of the firms do not actually provide a return to shareholders because they are often sold at the point at which the shares are virtually worthless. So please can we stop deluding ourselves that small high-tech companies are perfectly suited to this? The good ones do it already, but why on earth would they then want to give up employment rights in return for an extra part of this very risky journey? It just does not add up.

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I was slightly concerned when the Minister referred to self-employment for these sorts of firms. I understood from the chart that we have received with the Minister’s letter, for which I thank him, that they are outside employment law, and I think that the House would accept that. The references being made implied that self-employment might be an option for those working for the firm, and I think that would definitely be against HMRC guidance; if somebody is working principally for a firm then they should not be self-employed. I am concerned that we are perhaps beginning to develop a dialogue of a third tier of employment, and I hope that the Minister will be able to make it absolutely clear that self-employment is only for those who actually have a range of clients and customers and do not work for just one firm.

The noble Lord, Lord Deben, talked about how this might be a point for experimentation, but I think the experiment is already happening and has been happening through the examples that I have been giving, without the need to give up employment rights. In summary, I believe that this legislation is unloved, unnecessary, unwanted and, frankly, likely to be unused. I am concerned that this is not the best use of Parliament’s time. I am in the same position as the noble Lord, Lord Deben; I do not like voting against my own Government, but I just feel that there are too many flaws in this. It is not a hopeful scheme for the future; they are there working at the moment. Please, let us not compromise employment rights in return for shares that are very unlikely, for the vast majority of employees, to be worth anything at all.

Lord Forsyth of Drumlean: Before the noble Baroness sits down, I wonder if she could help us with the question that the noble Lord, Lord Monks asked: what exactly is the nature of the deal that has meant that the Liberals have taken a position that is well beyond Beecroft and which they were previously opposed to?

Baroness Brinton: My Lords, I believe that is well above my pay grade.

Lord Bilimoria: My Lords, when I first heard about this scheme, my initial reaction was to give the Government the benefit of the doubt because it encourages share ownership and enterprise—all good intentions. However, I have listened to the arguments of the noble Lords, Lord Pannick and Lord Forsyth of Drumlean, and to the noble Lord, Lord Deben, who has great relations with his coalition partners, summing it up by saying, “It won’t work”. The noble Baroness, Lady Brinton, has said the same.

I cannot understand this. I have started businesses and run businesses at different levels and I have given shares to my employees, so all this about £2,000-worth of shares—even the figure itself is baffling. Who on earth is going to go through all this for something as incentivising as £2,000-worth of a share incentive, although I know that that is a minimum figure, and then to have to get legal advice? Do people understand the practicalities of offering legal advice if every time someone applies for a job they have to get legal advice

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to go for the share scheme? Then the question was asked: what if these jobs are offered and the Government say that they are voluntary only? If a job is offered as an employee share job only, though, that is not voluntary. As an employee you either take that job on those terms or you do not. I think that the Government have the best of intentions, and they say that there will be no compulsion, but I cannot see this being taken up.

What research did the Government do before they came up with this scheme? We have heard from the noble Lord, Lord Forsyth, that Mark Florman says his members think that this is a great scheme. Did the Government check with Mark Florman before they proposed this scheme? Now the noble Baroness, Lady Warnock, tells us that Charlie Mayfield, who I respect greatly as one of the most successful chief executives in this country, running the John Lewis Partnership, says that this is laughable. That is the reaction of serious business to this.

6.30 pm

Have the Government thought through the practicalities of valuing private companies’ shares? Have they thought about the liquidity of shares and how difficult it is to sell them? In a private company you have no option. I have been a director of an AIM company. In AIM companies we have very little liquidity of shares and it is difficult to sell them—let alone for a FTSE 350, FTSE 250 or FTSE 100 company. The Government have not thought through the liquidity aspect.

What about the many wonderful share option schemes that are already in existence, which we all have used and are using today? I would not dream of giving share options to any of my employees and asking them to give up any of their employment rights. That is wrong. Asking them to give up rights is not a good way of giving an incentive to an employee. You ask them to take it on because they believe in you, in your business and in the future and that is why they want those shares, and they will benefit from them if they contribute to the success of that company—not by giving up some rights, which is fundamentally wrong in principle.

The Minister said that this is good for growth. The noble Lord, Lord Pannick, referred to the real world. I thought that there was a ban on ivory in this country. Whoever came up with this idea is living in a giant ivory tower, and has never run a business or had any interaction with a business in the real world. Can the Minister reveal the genius in Government who has come up with this amazing dog’s breakfast of a scheme?

Lord King of Bridgwater: My Lords, I think I am not the only Member on this side of the House who feels some embarrassment at finding ourselves in this situation. As has been said, particularly by the noble Lords, Lord Pannick and Lord Monks, this House passed a pretty categorical vote to suggest the omission of Clause 27. It included, among others, a previous Chancellor of the Exchequer—his name has not been mentioned here but he voted against it—and a former Cabinet Secretary. It was not the usual suspects causing trouble in the back reaches of the parliamentary process.

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I thought that there was not much new to be said but I credit the noble Lord, Lord Bilimoria, for bringing a few additional points into this debate that I think are very relevant. I join in the recognition of what has been described, rightly, as a correction of a previous mistake; none the less, the Government have corrected the position over the jobseeker’s allowance. However, some of us were waiting to see the Government’s serious response to the very major criticisms that were made a month ago on Report. This House’s duty of revising, amending and inviting the other place to think again was carried out, and the Government were given time to consider how best to respond.

My good friend Mr Michael Fallon, who had the responsibility of introducing this determination to disagree with the Lords in their amendment, said that it really was entrepreneurs on one side and employment lawyers on the other—not just the noble Lord, Lord Bilimoria, but a few others of us have had some small involvement in industry, employment and entrepreneurial activity over the years. I was interested that the noble Lord, Lord Forsyth, referred to the director of the British Venture Capital Association. I was the director of a leading venture capital investment trust for a number of years and I do not think that a single person I knew in that industry would support it or think that it might be a good idea.

I understand entirely why the noble Lord, Lord Flight, made the comments that he did because they bore out and illustrated the point made by the noble Baroness, Lady Warnock: who is this really intended for? The noble Lord, Lord Flight, will recognise that he has a background in and vast experience of a world where people do not think first when they go into employment, “What are my rights?”. They are thinking, “What are the opportunities for me here to really earn a substantial reward?”—as we know, a number of them earn very substantial rewards indeed. I have to say to him that it is quite difficult to stand up, in the ping of a ping-pong, when we are meant to have finished our revision and amendments, and say there are a number of things that now need to be sorted out. That is not acceptable.

I disagree with one point made by the noble Lord, Lord Pannick, that this will do great damage to industrial relations. I do not think it will at all, on the grounds that the noble Lord, Lord Deben, mentioned. I do not think that a single major company will touch it and it seems absolutely inconceivable that you could try to introduce this status into any major company. If some of your employees are entitled to redundancy pay and some are not, and then you get a downturn in trade and you are determining who should be kept, and if one of those people who does not get redundancy pay then gets dismissed and is told that he does not have a claim for unfair dismissal—as I understand it; like my noble friend, I am not a lawyer—he would immediately have a claim under discrimination. The idea that you ease the employer’s burden and prevent it being drawn into the courts is of course not so.

I certainly support the Government’s ambition to see what we can do to reduce unnecessary and undue burdens on employers, which certainly on occasions prevent the growth of employment. There is no higher

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objective at the present time, in our very difficult economic situation in the world when jobs everywhere are in very short supply, than doing everything we possibly can to encourage employment. However, that does not mean that we must lose our good sense and go for a scheme that someone has dreamt up if we see that at the end of the day problems will arise.

I had hoped that we would see some new approach to the issue. If the Government are absolutely committed to this idea and trying out this new approach to employment and the creation of jobs, it seems without question that people will be asked to address questions that would test quite sophisticated advisers in this field—the noble Baroness, Lady Brinton, was absolutely right about small start-up companies full of incredibly clever young men and women who have particular technical or other skills but no financial experience. Has my noble friend got nothing to say about whether independent advice, which would be paid for by the employer, should be available to people who find themselves in that situation? If the Government are not prepared to move in that direction, I will find it impossible to support their position.

Baroness Wheatcroft: My Lords, my noble friend Lord King mentioned a degree of embarrassment at finding himself in this situation, which I certainly share. At least those of us who are opposed to this legislation are not alone. The Financial Times, that great bastion of employee rights, ran a leader the day after the last debate in this House in which it said that this legislation contained,

“little to like and a lot to fear”,

and it advised strongly against progressing with it, saying that if this clause went ahead,

“employee share ownership may begin to be perceived as a shortcut to strip workers of their rights”.

That is not what any of us in this House want to see. We know that employee share ownership is a good thing. We want to support the Government in everything they can do to spread it, but this clause is not the way. The number of ways in which this clause could backfire has been enumerated this afternoon. Not much attention has been paid to the potential tax avoidance involved. It has been mentioned, but the Office for Budget Responsibility itself put a label of around £1 billion on the costs that might be in there. Is that really what the Government want to see happen? How is that compatible with the current agenda of trying to cut back, quite rightly, on tax avoidance?

It is the way in which this clause could detrimentally affect the idea of share ownership that causes me the biggest problem. It might not be big companies that will use it, and it is a very strange defence of a piece of legislation to say that hardly anybody is going to use it. I have heard that rather often and it seems an odd way to go about government business. There will be unscrupulous companies below the FTSE 250 that see this as a way of getting the labour force that they want on the least good terms. That is not going to encourage good employee relations. We want to do what my noble friend Lord Deben referred to and encourage the feeling that we are all in this together. If we are to

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go for growth, getting that sort of motivation will be important. Depriving people of basic rights is not the way to do that.

There is a potential exception for start-ups, where everybody starts off in the same boat and you do not risk this idea of a two-tier scheme of employees. Small companies probably need a bit more flexibility. They already have two years in which they do not need to worry about tribunals or redundancy, but they might need a little longer than that. In that case, perhaps we might ask my noble friend the Minister once more to see whether he can persuade the other place and the Government that this clause should be very narrowly restricted in its implications and application. As a clause that creates something open to any business it is potentially very dangerous.

We have also heard about the problems of valuing the shares. In his valiant attempt to defend this proposal, my noble friend Lord Flight said that we might well reach a stage where the Government have to stipulate the price-earnings ratio on which these shares would be sold. This is not the role that I wish to see my Government undertake. It is fraught with problems. This entire clause needs another rethink, even at this late stage.

Lord Adonis: My Lords, the noble Viscount has been a Minister for a short time only, but I think I speak for the whole House in recommending that he be promoted to an earldom for services to masochism. We have now debated this proposal for twice as long as the House of Commons saw fit to devote to it last week. In the hours of debate in this House, there has been one Member only, besides the Minister, who has wholeheartedly supported this proposal, and we pay great tribute to him: the noble Lord, Lord Flight. Even he sounded a note of equivocation today, saying that he hoped that the many problems that there were still with the scheme could be “ironed out” while it was being implemented. This is not good advice to legislators on how we should conduct our business.

However, I am grateful to, or perhaps sorry for, the noble Lord, Lord Flight—because it weakened his case—that he did not repeat the argument that he used last time, which was that we did not need worry about the £1 billion of potentially lost tax revenue, to which the noble Baroness referred. He said:

“The Treasury will therefore not lose tax revenue as a result of the tax arrangements; it will merely not get as much as it might otherwise get”.—[Official Report, 20/3/13; col. 622.]

I am sure that is hugely reassuring to HMRC and to those of us who are loyal taxpayers and who do not need to worry about the fact that there is no money to pay for anything, because it is simply revenue that the Treasury might otherwise not have got.

6.45 pm

When we debated this proposal on Report, the noble Lord, Lord Forsyth, said:

“I am surprised that this clause has survived so long. The scheme is ill thought through, confused and muddled”.—[Official Report, 20/3/13; col. 597.]

If the House of Lords exists for any purpose, it is surely to see that legislative schemes that are ill thought through, confused and muddled are improved and

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preferably removed. We have done neither in respect of this proposal so far. There is the issue with which we all grapple when legislation returns from the House of Commons as to what our position is in respect of it.

I need to make clear, particularly to noble Lords who have not been following the labyrinthine course of this legislation over recent months, that this proposal was not in any party’s manifesto. It was not in the Tory or Lib Dem manifestos. It was not in the coalition agreement. It was not in any report on wider share ownership or employment rights in any recent period. The Nutall report, which was exhaustive on the extension of employment rights and was published six months before this proposal saw the light of day, did not even so much as discuss it, so frivolous would it have been regarded by the eminent advisers to the Nutall review.

Where does this report come from? We all know: it is on the rebound from the Beecroft proposal to do away with certain employment rights in respect of unfair dismissal and instead to substitute a single payment that would have resulted from it. The Business Secretary was not prepared to go along with that. Then, as we have heard from various parts of the House, some kind of deal was apparently done between the Chancellor and the Business Secretary to resurrect a version of the Beecroft proposal in return for shares.

There should be an independent, judge-led inquiry into the terms of the deal between the Chancellor and the Business Secretary. The House needs to know and evidence should be taken in public as to precisely what was said and why our good friends on the Lib Dem Benches are so loyally supporting a proposal that appears to stand against everything that all of them came into politics to achieve. I look at them from here. I do not think that any of them came into politics to remove basic, fundamental employment rights in return for a mess of potage, which is what this proposal before the House is. When we last debated this, to my great surprise the Lib Dems almost entirely went into the Lobby with Government, apart from the noble Baroness who spoke earlier and who came into the Lobby with us. I hope that this time they may have the courage of their convictions and come into the Lobby with us.

The Minister for Employment in the House of Commons used three arguments to support this plan that have all disintegrated in the course of the debate this afternoon. First, he said that the new employment status would be “absolutely voluntary”. There is no “absolute voluntarism” when the power relationship is so unequal and there is no right to independent advice either on the nature of the contract on the table or on the rights that are being forgone. I hear overwhelming support for the idea that there should be independent, legal and financial advice available to anybody who might be faced with signing a contract of this kind, before they are obliged to enter into it. I hope that the noble Viscount will take this support back to his colleagues in the Cabinet. In all parts of the House, there has been no movement on that issue in the course of our deliberations.

When we last debated this, the noble Lord, Lord King, said:

“The power is with the employer at a time when many young people are finding it hard to get jobs. In no way is it a fair balance to say, ‘You have an impartial opportunity to decide’. I just

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wonder what will happen to the poor job applicant who, when he is told what the terms are, says, ‘I will now go and consult my adviser’ … I know exactly what the employer will say—‘Well, do you want the job or don’t you?’”—[

Official Report

, 20/3/13; col. 611.]

That is precisely the situation.

Secondly, we have been told that this is mainly an incentive for small start-up companies, particularly in the high-tech sector. In the House of Commons last week, Michael Fallon said that it would apply in particular to younger companies at the beginning of their lives that,

“will be able to use this status at a time when they might not be able to pay their staff more than competitor companies, or those already established in the marketplace”.—[

Official Report

, Commons, 16/4/13; col. 176.]

The Bill does not say anything about that. It does not have any such restriction. It is of general application. If the intention is that it should apply only to a very limited extent, surely it is our duty to see that the legislation states that. It does not state that, and part of the reason—I latch on to the remark of the noble Lord, Lord Forsyth—is that it would be quite difficult in law to specify how it could apply to only a certain category of companies to which the Government intended that it should apply, and not to others. They need to take that back and consider it further.

The third argument is that the business community wants to see this change. Having read the Office for Budget Responsibility’s report, I have no doubt that quite a number of company employees might find the tax status of these shares attractive. We should remember that shares up to a valuation of £50,000 will be free of capital gains tax. If the legislation is passed, I can well understand that this will prove highly attractive to tax planners. Many people may quickly transfer their employment status in order to take advantage of it. However, the idea that there are large numbers of companies or putative companies that want to take advantage of this status in order to engage in more entrepreneurial activity, which is the justification for the scheme, is not borne out by any of the consultation. There were 184 responses to the original consultation. Three supported the scheme: only two more than the number of supporters in your Lordships’ House. One supporter was apparently the Institute of Directors. When we last debated this, the noble Baroness, Lady Wheatcroft, said that when she asked whether it had consulted its members, the answer was no. So there is not much support there.

Justin King, the chief executive of Sainsbury’s, who is on the Prime Minister’s business advisory group, said that trading basic employment rights for shares was not what we should be doing. He said:

“What do you think the population at large will think of businesses that want to trade employment rights for money? … Our agenda … should be making employing people easier and less costly”.

Lastly, I come to the point that is so important and that was raised by the noble Baroness at the end of her remarks: the issue of efficient tax planning. The Office for Budget Responsibility estimates that this proposal could cost up to £1 billion a year in lost income to the Treasury. It states:

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“It is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning”.

In this time of austerity, is this an appropriate, let alone a moral, thing for your Lordships to be doing: to hand out potentially £1 billion a year in pursuit of a policy that the Minister, and Ministers in another House, have not declared as being in support of more efficient tax planning but which they have stated is in order to achieve entrepreneurial gains? One of the biggest impacts of the policy could be one that is completely opposite to the intentions of its founders.

I will leave the last word to the chief executive of the Employee Ownership Association. We all want to see wider employee ownership and engagement in our companies. In a statement put out this afternoon to inform the debate, Iain Hasdell said:

“There is absolutely no need to dilute the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost employee ownership … all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of the workforce”.

Our duty this afternoon is not to dilute the entitlements of the workforce, without which there will be no growth and no recovery in this country.

Viscount Younger of Leckie: I thank noble Lords for their contributions to this debate. I reiterate that the Government would like to give individuals and companies more choice in how they discuss and agree employment contracts. The employee shareholder status provides this additional choice. I will start by addressing the issue raised by the noble Baroness, Lady Warnock, about who the policy is aimed at. She asked, in effect, whether anybody would want this employment status, and who would want to employ an employee shareholder. These themes were raised also by my noble friends Lord Forsyth and Lady Brinton.

I clarify again that we understand that the new employment status will not be appropriate for all companies and will not be taken up across the board. It will simply add to the options and flexibility available to companies and individuals in determining their employment relationships in the same way that workers or employees, part-time or permanent staff, are not suitable for all companies. We expect that the new status will probably appeal mainly to fast-growing, small, start-up companies and individuals, as this is the level where employment rights are seen to impact the most. We have never said that the take-up will be widespread. We have always said that it would apply to a small number of companies, should they wish to take it up.

My noble friend Lady Brinton again raised the issue of who this might apply to. She cited the Cambridge example. She is quite right that companies that are likely to take this up are those that are new. They are likely to be making products that they want to be successful in the long term. She is right to say that this can be an extremely long road. However, she is taking a particularly negative view of the opportunity for employee shareholders. If I heard her correctly, she

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said that employee shareholders would have to pay for the shares up front. That is not the case. They will be given the shares, which will be free, even though, clearly, they will have to pay tax on them.

My noble friend Lord Forsyth raised the issue of tax, and the cost of the new status. The Office for Budget Responsibility has stated that in the long term the policy may cost up to £1 billion, but that relates to periods beyond the 2020s. It is simply not possible to be certain about costs so far in the future. The noble Lord, Lord Adonis, also raised this issue. Moreover, the tax rules will contain protections to prevent abuse—again, this issue was raised by several noble Lords—such as serial use of the scheme, and rules to ensure that those who have a material interest in the company and who thereafter can influence decision-making will not be eligible for the tax advantages. The Government will keep the rules on tax under review. I hope that provides a measure of reassurance.

The noble Lord, Lord Monks, who is in his place, raised the issue of Beecroft. This familiar story was raised in Committee and on Report. A number of noble Lords suggested that this was Beecroft by the back door. It is not. The new employee shareholder status is different from the no-fault dismissal proposal. Individuals will become shareholders of the company at the start of the employment relationship. This is an important benefit conferred by employee shareholder status. Unlike in the case of no-fault dismissal, the employee shareholder status will be agreed between employers and individuals in contractual negotiations. Employers will also be free to offer improved contractual terms such as contractual redundancy payments in an employee shareholder contract.

The noble Lord, Lord Myners, raised the issue of share buyback. He asked whether in effect a company could force an employee shareholder to sell back their shares. A company may require an individual to sell back their shares as a condition of the shares. However, this type of restriction will affect the value of the shares, which the company must assess when granting the shares and attaching restrictions. This comes back to what I said earlier about negotiations needing to take place in advance of the contract being signed by both the employee shareholder and the employer.

The noble Lord, Lord Pannick, raised the issue of independent advice, as did a number of other noble Lords, including my noble friend Lady Brinton. We do not require a person who is moving from employee status to worker status to be given legal advice before becoming a worker. Therefore, it is not clear why we should require legal advice to be given when an individual moves from employee to employee shareholder status—a status that carries far more employment rights than that of the worker. Companies are not required to provide independent financial advice to people who are thinking of becoming employees or workers, and employee shareholder jobs are just like worker and employee jobs.

The Government will provide guidance on gov.uk about the new status in the same way that they provide guidance about employee and worker employment statuses. Using this information will help individuals to determine whether the employee shareholder status

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is right for them. I say again to my noble friend Lord Forsyth that the situation of individuals taking up employment with employee shareholder status is distinctly different from the often challenging and difficult discussions that can take place, and sometimes need to take place, to determine settlement agreements at the end of an employment.

The noble Lord, Lord Myners, raised the issue of general advice on complex articles of association. Our guidance will make clear to both employers and employees the sorts of issues to consider before making a decision. The guidance, as I mentioned earlier, is in draft form and we continue to welcome views to improve it.

7 pm

My noble friend Lord Forsyth raised the issue of share valuation at the beginning and again in his comments later on. He will know that there is already a market for the valuation of private company shares that is normally carried out by accountants or actuaries, to which I alluded earlier. This clause is all about flexibility, and it is not for the Government to be prescriptive in terms of who should value the shares. As I mentioned, practitioners have established ways for valuing shares, including examining the company’s performance and financial status as shown in its accounts for a period up to the date of the valuation, considering the plans of the company by looking at order books and analysing future commitments, and comparing with similar companies or sectors the value of companies, in particular the appropriate yields and price-earnings ratios, and accounting for the commercial and economic background at the date of valuation. I was grateful for the supportive comments made by my noble friend Lord Flight in this respect. Although I said at the beginning that this is straightforward and I stand by that, it may be the case that, given certain negotiations, it becomes more complicated. However that depends, again, on the discussions that are undertaken between the employer and the potential employee shareholder.

Lord Forsyth of Drumlean: On this point of the valuation of shares, could my noble friend deal with the point that was made by the noble Lord, Lord Bilimoria, about liquidity? It is all very well to reach a theoretical value of shares, but the value is actually in what people are prepared to pay for them. In small private companies where there is no liquidity, how will you deal with that?

Viscount Younger of Leckie: It remains the case that these are discussions that must take place between the employer and the employee. Again, it is not for the Government to prescribe or give advice in this respect. That is a consistent theme that I have taken.

On the same theme of shares, as raised by my noble friend Lord Forsyth, we recognise that there may not be a market for private company shares and therefore it is important that, where appropriate, a buyback clause will be useful to both the employee and the employer. This is an issue that the noble Lord, Lord Myners, raised as well. We introduced in the other place a power to bring forward the regulations that would govern these buyback clauses in the event that

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employers were behaving unscrupulously. This would prevent employee shareholders being forced to sell back their shares at an unnaturally low price.

The noble Baroness, Lady Turner of Camden, made an assertion, or perhaps it was an accusation, that the Government want to remove employment status. I reiterate what I mentioned both in Committee and on Report, that this is not about removing rights, it is about creating a new employment status that offers a different set of rights and a mandatory share ownership. The status, I say again, is not compulsory for companies to use, and it will only be suitable for those companies that want to share ownership with their workforce. We must remember that employee shareholders will retain the majority of employment rights, including, for example, automatic unfair dismissal rights and the right to be paid the national minimum wage. We have consistently said that the new status will not suit all people or all companies. This is very much a common theme. However, for those who choose to use it, the employee shareholder status offers more flexibility and allows greater risk- and reward-sharing between people and companies.

My noble friend Lady Wheatcroft and others raised the issue of whether the employee shareholder scheme is open to tax avoidance, an issue that I touched on slightly earlier. It is a key aspect of the policy to allow employee shareholders to share in the success of their employers without paying capital gains tax on at least some of their gains. However, to guard against abuse of the tax exemption, there are several rules that limit the number of shares that can be exempt. For example, the rules will prevent repeated consecutive use or multiple simultaneous use of employee shareholder status to get around the limit. In addition, anybody who controls, alone or with other connected persons, 25% or more of the voting power in the company, will not be able to receive exempt shares. We will not allow people such as spouses or children who are connected to individuals who control 25% or more of the company to benefit from the exemption.

We have listened to the concerns and, as was mentioned earlier, we have acted to ensure that jobseeker’s allowance claimants will not be penalised if they decide not to apply for or accept an employee shareholder job. Together with protections for employees, our announcement about jobseeker’s allowance policy means that no claimant or employee can be forced to accept this status. I thank many noble Lords for their support in this particular respect.

The new employment status gives ambitious, talented individuals with entrepreneurial spirit an opportunity to share in the risks and rewards of being part of their employing company. I want to say something important in these closing stages. I have clearly listened this afternoon and I have heard the strength of feeling in the House towards this particular clause. I ask the House to support the Motion to agree with the Commons’ position that Clause 27 be retained. If the House does not support that Motion, I will ensure that the strength of feeling in the House today is conveyed to my ministerial colleagues.

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Lord King of Bridgwater: Can the Minister confirm that the Government have not felt able to move towards a clause on the issue of availability of independent advice?

Viscount Younger of Leckie: That is correct. I did not make any movement in that direction. I reiterate again to my noble friend that I am not immune to the strength of feeling in the House this afternoon. I have clearly listened and I will be conveying all comments back to the other place and to my ministerial colleagues.

Lord Pannick: My Lords, I am grateful to the noble Lord for the skill and courtesy with which he has presented the Government’s case. I am also very grateful to him for his frank acknowledgment of the strength of feeling on all sides of the House in relation to Clause 27. Of course he will appreciate that only if this House stands by its previous decision and asks the Commons to think again will the Government and the Commons do so.

Your Lordships can rarely have heard a debate in which so many noble Lords with business experience and political experience on all sides of the House have carefully and eloquently explained why a Government proposal is either wrong in principle, or damaging in practice, or unworkable, or misses its target, or unbalanced, or all of the above. Noble Lords clearly have a variety of reasons for criticising Clause 27. It is striking indeed that no speaker this afternoon apart from the Minister was supportive of Clause 27 in its current form. Even the noble Lord, Lord Flight, who complained of what he described as “negativity”, said that the clause could not work if the shares were worth only £2,000 at the date of issue and accepted that other problems needed to be addressed.

The noble Lord, Lord Deben, asked rhetorically for advice on what the noble Lord should do, given his belief that a positive proposal in this context could be brought forward. It is not for me to advise the noble Lord, Lord Deben, but if I were doing so I would suggest to him and to other noble Lords who may be in the same position that the answer is clearly to reject the half-baked scheme currently before the House in the hope that the Government take this idea back to the drawing board—or perhaps, to use the expression of the noble Lord, Lord Forsyth, on Report, back to the bath in which he suggested that this idea was dreamt up—so that they can reconsider whether in this Bill, or in some future Bill, a more thoughtful and workable scheme could be brought forward.

The concern about Clause 27 is not politically partisan. The noble Lord, Lord King of Bridgwater, and the noble Baroness, Lady Wheatcroft, referred to a measure of embarrassment in their position. They should not be embarrassed. It is to the great credit of their Benches that so many noble Lords have spoken out and voted in favour of deleting Clause 27 or abstained on Report. I of course appreciate that it is not easy to do so, but it is in no one’s interest for this proposal to be enacted in its current form.

The Government and the House of Commons have so far given the most cursory consideration to the concerns expressed on all sides of this House. They should be asked to think again. I wish to test the opinion of the House.

22 Apr 2013 : Column 1278

7.10 pm

Division on Motion B1

Contents 260; Not-Contents 191.

Motion B1 agreed.

Division No.  1

CONTENTS

Aberdare, L.

Adams of Craigielea, B.

Adebowale, L.

Adonis, L.

Allenby of Megiddo, V.

Alliance, L.

Alton of Liverpool, L.

Andrews, B.

Armstrong of Hill Top, B.

Ashdown of Norton-sub-Hamdon, L.

Bach, L.

Bakewell, B.

Bassam of Brighton, L.

Beecham, L.

Berkeley, L.

Best, L.

Bew, L.

Bichard, L. [Teller]

Bilimoria, L.

Billingham, B.

Bilston, L.

Blackstone, B.

Blood, B.

Borrie, L.

Bradley, L.

Bradshaw, L.

Bragg, L.

Brinton, B.

Broers, L.

Brooke of Alverthorpe, L.

Brookman, L.

Browne of Belmont, L.

Campbell of Surbiton, B.

Campbell-Savours, L.

Carter of Coles, L.

Chandos, V.

Christopher, L.

Clancarty, E. [Teller]

Clark of Windermere, L.

Clarke of Hampstead, L.

Clinton-Davis, L.

Collins of Highbury, L.

Colville of Culross, V.

Condon, L.

Corston, B.

Cotter, L.

Coussins, B.

Craig of Radley, L.

Crawley, B.

Crisp, L.

Cunningham of Felling, L.

Davidson of Glen Clova, L.

Davies of Coity, L.

Davies of Oldham, L.

Dean of Thornton-le-Fylde, B.

Desai, L.

Donaghy, B.

Donoughue, L.

Dubs, L.

Elystan-Morgan, L.

Evans of Temple Guiting, L.

Exeter, Bp.

Falconer of Thoroton, L.

Falkland, V.

Farrington of Ribbleton, B.

Faulkner of Worcester, L.

Fearn, L.

Fellowes, L.

Filkin, L.

Finlay of Llandaff, B.

Flather, B.

Forsyth of Drumlean, L.

Foster of Bishop Auckland, L.

Foulkes of Cumnock, L.

Gale, B.

Gibson of Market Rasen, B.

Glenarthur, L.

Goodhart, L.

Gordon of Strathblane, L.

Gould of Potternewton, B.

Grantchester, L.

Greenway, L.

Grenfell, L.

Griffiths of Burry Port, L.

Grocott, L.

Hannay of Chiswick, L.

Hanworth, V.

Hardie, L.

Harries of Pentregarth, L.

Harris of Haringey, L.

Harrison, L.

Hart of Chilton, L.

Haworth, L.

Hayman, B.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Henig, B.

Hereford, Bp.

Hilton of Eggardon, B.

Hollins, B.

Hollis of Heigham, B.

Howarth of Newport, L.

Howe of Idlicote, B.

Howells of St Davids, B.

Howie of Troon, L.

Hoyle, L.

Hughes of Stretford, B.

Hughes of Woodside, L.

Hunt of Kings Heath, L.

Hylton, L.

Irvine of Lairg, L.

Jay of Ewelme, L.

Jay of Paddington, B.

Joffe, L.

Jones of Whitchurch, B.

Jones, L.

Jordan, L.

Judd, L.

Kennedy of Southwark, L.

Kennedy of The Shaws, B.

Kerr of Kinlochard, L.

Kidron, B.

Kilclooney, L.

King of Bow, B.

King of Bridgwater, L.

Kinnock of Holyhead, B.

Kinnock, L.

Kirkhill, L.

22 Apr 2013 : Column 1279

Knight of Weymouth, L.

Laird, L.

Laming, L.

Layard, L.

Lea of Crondall, L.

Leitch, L.

Lester of Herne Hill, L.

Liddell of Coatdyke, B.

Liddle, L.

Linklater of Butterstone, B.

Lipsey, L.

Lister of Burtersett, B.

Lloyd of Berwick, L.

Low of Dalston, L.

Luce, L.

Lytton, E.

McAvoy, L.

McConnell of Glenscorrodale, L.

McDonagh, B.

Macdonald of Tradeston, L.

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

Mackenzie of Framwellgate, L.

McKenzie of Luton, L.

Maclennan of Rogart, L.

Mallalieu, B.

Marks of Henley-on-Thames, L.

Martin of Springburn, L.

Masham of Ilton, B.

Massey of Darwen, B.

Mawson, L.

Maxton, L.

Meacher, B.

Mitchell, L.

Monks, L.

Moonie, L.

Morgan of Drefelin, B.

Morgan of Ely, B.

Morgan of Huyton, B.

Morgan, L.

Morris of Aberavon, L.

Morris of Handsworth, L.

Morris of Yardley, B.

Myners, L.

Neuberger, B.

Noakes, B.

Noon, L.

Nye, B.

Oakeshott of Seagrove Bay, L.

O'Donnell, L.

O'Loan, B.

O'Neill of Bengarve, B.

O'Neill of Clackmannan, L.

Palmer, L.

Pannick, L.

Parekh, L.

Patel of Blackburn, L.

Patel of Bradford, L.

Patel, L.

Pendry, L.

Pitkeathley, B.

Plant of Highfield, L.

Ponsonby of Shulbrede, L.

Prosser, B.

Puttnam, L.

Quin, B.

Radice, L.

Ramsay of Cartvale, B.

Reid of Cardowan, L.

Rendell of Babergh, B.

Richard, L.

Richardson of Calow, B.

Robertson of Port Ellen, L.

Rogan, L.

Rooker, L.

Rosser, L.

Rowe-Beddoe, L.

Rowlands, L.

Royall of Blaisdon, B.

Sawyer, L.

Scott of Needham Market, B.

Sheldon, L.

Sherlock, B.

Simon, V.

Singh of Wimbledon, L.

Skidelsky, L.

Smith of Basildon, B.

Smith of Finsbury, L.

Smith of Gilmorehill, B.

Snape, L.

Soley, L.

Steel of Aikwood, L.

Stern, B.

Stevenson of Balmacara, L.

Stoddart of Swindon, L.

Stone of Blackheath, L.

Symons of Vernham Dean, B.

Taverne, L.

Taylor of Bolton, B.

Temple-Morris, L.

Thomas of Winchester, B.

Thornton, B.

Tonge, B.

Touhig, L.

Triesman, L.

Tunnicliffe, L.

Turnberg, L.

Turner of Camden, B.

Wall of New Barnet, B.

Walpole, L.

Warner, L.

Warnock, B.

Warwick of Undercliffe, B.

Watson of Invergowrie, L.

West of Spithead, L.

Wheatcroft, B.

Wheeler, B.

Whitaker, B.

Whitty, L.

Wigley, L.

Wilkins, B.

Williams of Crosby, B.

Williamson of Horton, L.

Willis of Knaresborough, L.

Wills, L.

Winston, L.

Wood of Anfield, L.

Woolf, L.

Woolmer of Leeds, L.

Worthington, B.

Young of Norwood Green, L.

NOT CONTENTS

Addington, L.

Ahmad of Wimbledon, L.

Alderdice, L.

Allan of Hallam, L.

Anelay of St Johns, B. [Teller]

Arran, E.

Ashton of Hyde, L.

Astor of Hever, L.

Attlee, E.

Ballyedmond, L.

Barker, B.

Bates, L.

Benjamin, B.

Berridge, B.

22 Apr 2013 : Column 1280

Black of Brentwood, L.

Blackwell, L.

Blencathra, L.

Bonham-Carter of Yarnbury, B.

Bottomley of Nettlestone, B.

Bowness, L.

Brabazon of Tara, L.

Bridgeman, V.

Brittan of Spennithorne, L.

Brougham and Vaux, L.

Browning, B.

Burnett, L.

Buscombe, B.

Byford, B.

Caithness, E.

Chadlington, L.

Chalker of Wallasey, B.

Chidgey, L.

Clement-Jones, L.

Colwyn, L.

Cope of Berkeley, L.

Courtown, E.

Craigavon, V.

De Mauley, L.

Deben, L.

Deighton, L.

Denham, L.

Dholakia, L.

Dixon-Smith, L.

Dobbs, L.

Doocey, B.

Dundee, E.

Dykes, L.

Eaton, B.

Eden of Winton, L.

Elton, L.

Empey, L.

Falkner of Margravine, B.

Faulks, L.

Fellowes of West Stafford, L.

Fink, L.

Flight, L.

Fookes, B.

Fowler, L.

Framlingham, L.

Fraser of Carmyllie, L.

Freud, L.

Garden of Frognal, B.

Gardiner of Kimble, L.

Garel-Jones, L.

Geddes, L.

German, L.

Glendonbrook, L.

Goodlad, L.

Goschen, V.

Grade of Yarmouth, L.

Green of Hurstpierpoint, L.

Griffiths of Fforestfach, L.

Hamilton of Epsom, L.

Hamwee, B.

Hanham, B.

Harris of Peckham, L.

Harris of Richmond, B.

Henley, L.

Higgins, L.

Hill of Oareford, L.

Hodgson of Astley Abbotts, L.

Home, E.

Hooper, B.

Howe, E.

Hunt of Wirral, L.

Hurd of Westwell, L.

Hussain, L.

Inglewood, L.

Jenkin of Kennington, B.

Jenkin of Roding, L.

Jolly, B.

Kirkham, L.

Kirkwood of Kirkhope, L.

Knight of Collingtree, B.

Kramer, B.

Lamont of Lerwick, L.

Lang of Monkton, L.

Leach of Fairford, L.

Lee of Trafford, L.

Lexden, L.

Lindsay, E.

Lingfield, L.

Liverpool, E.

Loomba, L.

Lothian, M.

Lucas, L.

Luke, L.

Lyell, L.

McColl of Dulwich, L.

MacGregor of Pulham Market, L.

MacLaurin of Knebworth, L.

Maddock, B.

Magan of Castletown, L.

Mancroft, L.

Marland, L.

Marlesford, L.

Miller of Chilthorne Domer, B.

Montrose, D.

Morris of Bolton, B.

Moynihan, L.

Naseby, L.

Nash, L.

Neville-Jones, B.

Newby, L. [Teller]

Newlove, B.

Northbrook, L.

Northover, B.

Norton of Louth, L.

O'Cathain, B.

Palumbo, L.

Parkinson, L.

Parminter, B.

Perry of Southwark, B.

Phillips of Sudbury, L.

Popat, L.

Randerson, B.

Rawlings, B.

Razzall, L.

Redesdale, L.

Rennard, L.

Ribeiro, L.

Risby, L.

Roberts of Llandudno, L.

Roper, L.

Saatchi, L.

Sassoon, L.

Seccombe, B.

Selborne, E.

Selkirk of Douglas, L.

Selsdon, L.

Sharkey, L.

Sharp of Guildford, B.

Sharples, B.

Shaw of Northstead, L.

Sheikh, L.

Shephard of Northwold, B.

Shutt of Greetland, L.

Skelmersdale, L.

Soulsby of Swaffham Prior, L.

Spicer, L.

Stedman-Scott, B.

Stephen, L.

Sterling of Plaistow, L.

Stewartby, L.

Stoneham of Droxford, L.

Storey, L.

22 Apr 2013 : Column 1281

Stowell of Beeston, B.

Taylor of Holbeach, L.

Teverson, L.

Thomas of Gresford, L.

Tope, L.

Trefgarne, L.

Trenchard, V.

Trimble, L.

True, L.

Trumpington, B.

Tyler, L.

Ullswater, V.

Vallance of Tummel, L.

Verma, B.

Waddington, L.

Wakeham, L.

Waldegrave of North Hill, L.

Wallace of Saltaire, L.

Wallace of Tankerness, L.

Walmsley, B.

Warsi, B.

Wasserman, L.

Watson of Richmond, L.

Wilcox, B.

Younger of Leckie, V.

Enterprise and Regulatory Reform Bill

Commons Reasons and Amendments

7.25 pm

Lords Amendment35: Clause 56, page 54, line 40, leave out paragraph (a)

Commons disagreement and reason

The Commons disagree to Lords Amendment No. 35 for the following Reason—

35A: Because it is appropriate for section 3 of the Equality Act 2006 to be repealed.

Motion A

Moved by Baroness Stowell of Beeston

That this House do not insist on its Amendment 35, to which the Commons have disagreed for their Reason 35A.

Baroness Stowell of Beeston: My Lords, in moving Motion A I will speak also to Motion B. We are now discussing the provisions in the Enterprise and Regulatory Reform Bill, which seek to reform the remit of the Equality and Human Rights Commission. I will turn in a moment to the specifics of the Motion and the amendments before us. First, let me remind the House why we are discussing the EHRC, or what we often more commonly refer to as the commission, Britain’s designated equality body and “A-rated” national human rights institution.

In May last year, we set out our plans to support the commission to become the valued and respected national institution that we all want it to be. Even the commission’s many supporters in this House have acknowledged that the first few years of its existence were anything but trouble free. I am not going to go into the detail of these problems again today, but I do want to be clear that the Government’s motive in making changes was and is to secure a successful future for the commission so it is in the strongest position possible to do its vital work.

We are already making progress. In the past three months alone we have agreed with the commission a new governance framework document and budget, both of which ensure that the commission is able properly to fulfil its important duties and protect its operational independence. The new chair, the noble Baroness, Lady O’Neill, and other members of the new board have now been in post for several months and are building on the work of their predecessors. We believe that the commission is going from strength to strength. Indeed, the working relationship between this Government and the commission is marked by a

22 Apr 2013 : Column 1282

mutual respect and clear understanding of the distinct roles that each is there to fulfil and how we can work together towards a fairer society. I believe that this will be evident when we come to the next debate on caste discrimination.

Having given that introduction, let me move to the Motions in front of us. In the ERR Bill, the Government originally put forward two legislative changes that we believe will underpin the positive changes which our non-legislative reforms have already helped to bring about. This House rejected the Government’s amendments on Report, but the other place has disagreed.

First, we are asking noble Lords not to insist on their Amendment 35, which would remove from the Bill the repeal of Section 3 of the Equality Act 2006, what is otherwise known as the commission’s general duty. Section 3 imposes a general duty on the commission to perform its functions with a view to “encouraging and supporting the development” of a fairer society and it sets out five ways in which it should do this. As I have made clear during all of our debates, the statement included in that general duty is one we can all support because we all want a fairer and more equal society. However, it is this Government’s view that making this a statutory duty for the Equality and Human Rights Commission, in addition to its specific responsibilities to promote and to protect equality, diversity and human rights, dilutes the clarity of purpose necessary for it to be effective and successful.

The Government are clear that the commission’s core purpose is what I have just said—to promote and protect equality, diversity and human rights. That purpose is underpinned by the detailed duties contained in Sections 8 and 9 of the Equality Act 2006. The repeal of the general duty does nothing to affect the commission’s ability to fulfil these duties. It is our view that its focus on them will enhance its performance.

7.30 pm

As much as I understand many noble Lords’ wish for Section 3 to remain, during the debates in both Houses we have not heard any example of how its repeal would prevent the commission carrying out the kind of work which has had real impact. Indeed, in its most recent briefing paper, circulated to all Peers, the commission explains that its programme of work is guided by the specific powers and duties in the Act. The work for which it is respected and which has had great effect, such as its inquiry into disability-related harassment—and there are many others—would not be affected by the removal of the general duty at Section 3. Again, the commission itself has confirmed this in its own briefing note.

In many ways, the general duty could be argued as nothing more than symbolic and should therefore be left in place, but that is not the case. The commission is required to monitor progress against the general duty and to provide a comprehensive report to Parliament. This brings me to Lords Amendment 36, in relation to the commission’s monitoring duty at Section 12.

Section 12 sets out the commission’s duty to monitor progress against the aims set out in Section 3. We are asking noble Lords not to insist on their Amendment 36 so that the commission reports instead on progress

22 Apr 2013 : Column 1283

against its equality and human rights duties, those at Sections 8 and 9. This is a consequence of the repeal we are seeking of Section 3 but it also reflects our aim to focus the work of the commission. The present monitoring requirement is burdensome. Can we reasonably expect the commission to report meaningfully against the changes in society in relation to the aims in the general duty?

Enabling the commission to report against its equality, diversity and human rights duties will still allow it to monitor and report widely on changes in society relating to these duties, and thus hold a mirror up to society in these respects. It will also allow it to monitor and report on its own impact on the areas that it is uniquely placed to influence and change. However, to go further and ask it to assess how “fair” society is gives rise to ill-targeted and costly work. Having clearly focused monitoring and reporting will ensure that evidence directly feeds into the commission’s plans, and enable Parliament and the Government to hold the commission to account as the reports will be able to show where the commission is having impact, and where work still needs to be done.

We have debated the Equality and Human Rights Commission in great depth on several occasions over the past few months. I thank again all noble Lords who have given up their precious time to do so with me in private as well as on the Floor of the House. One thing we all agree on is that we want the commission to be an effective national human rights institution and equality body, trusted and respected to promote and protect equality and human rights. It is because we care that we are making these reforms. We are confident that, with these changes, the commission will continue to go from strength to strength with new leadership, an agreed budget, and a new framework document that recognises the commission’s continuing independence.

The other place has made clear its views. We therefore ask that noble Lords do not insist on their amendments. I beg to move.

Motion A1

Moved by Baroness Campbell of Surbiton

As an amendment to Motion A, leave out from “House” to end and insert “do insist on its Amendment 35”.

Baroness Campbell of Surbiton: My Lords, it is with great sorrow that I find myself here at ping pong, seeking to reinstate Section 3 of the Equality Act 2006. I really do not do this lightly. I know that a challenge to the Government at this stage should be made only when it is absolutely necessary and all other routes have been exhausted. I had hoped that the Government would listen to the many and exceptionally well considered arguments made by all but two noble Lords on Report. I expected something more than a blanket no. That is why, having explained my reasons to the Minister last week, I have retabled the amendments that were overturned in the other place.

22 Apr 2013 : Column 1284

We have yet to hear of a single example of how the commission’s capacity to act as the guardian of equality and human rights in Britain will be improved by repealing the general duty in Section 3, a duty which gives a holistic direction to the commission based on principles of dignity, respect and fairness, and takes it to, but not beyond, legal enforcement in helping society change for the better. The Equality and Human Rights Commission itself has said that it now has sufficient focus and, in the absence of robust reasons for removing it, Section 3 should remain.

I ask your Lordships to recall where the duty came from and to consider where its repeal may take us in the future. Twenty years ago today, Stephen Lawrence was murdered by a group of young men for no reason other than the colour of his skin. The Metropolitan Police made a catalogue of errors in the investigation into his murder. Our criminal justice system failed Stephen Lawrence, and it failed his family in their quest for justice. It is a sad truth that it took this tragedy to create a moment of enlightenment. The inquiry, led by Sir William Macpherson, identified that racial discrimination could not be seen as the lone action of a few bad apples. It was part of the institutional culture of the Metropolitan Police.

That insight led to the sea-change in our approach to equality law and the structural support to promote and enforce it. The general duty embodies this shift in thinking. The role of the commission is not simply to seek compensation for those who experience discrimination. As Age UK has noted, it is to pursue cultural change to prevent such discrimination from occurring in the first place. This is not only about racial discrimination. It is about institutional discrimination and violations of human rights in all their guises and across society—for example, in parts of the NHS and our care system, as the EHRC demonstrated in its inquiry into older people’s treatment at home. It is also widespread in the criminal justice system and local authority practice, as the disability hate crime inquiry revealed. It is rife in the exploitation of migrant workers, exposed by the inquiry into the meat processing industry.

Ministers have argued that the general duty is symbolic and aspirational, as if this were enough to dismiss it out of hand. The general duty symbolises our commitment to preventing the kind of injustice faced by the Lawrence family, or the routine abuse of disabled young people in institutions because of indifference and cruelty. It aspires to a society founded on dignity, respect and equality—notoriously absent in these cases. However, contrary to what Ministers claim, the general duty is not, in fact, merely symbolic. Its repeal could have major implications for the commission’s role in monitoring equality and human rights. In the other place last week, the Minister told MPs:

“We are also changing the commission’s monitoring duty to ensure that it reports on its core functions, rather than on the state of society generally”.—[Official Report, Commons, 16/4/13; col. 217.]

At present the commission is required to monitor Britain’s progress towards the aims of the general duty. In so doing it holds up a mirror to society, as it did in its seminal report, How fair is Britain?. As the Minister indicated, if the general duty is repealed, the monitoring duty will be fundamentally changed—it

22 Apr 2013 : Column 1285

will be limited to holding up a mirror to itself and asking only, “How effective is the commission?”. This is why Amendment 35 relating to Section 3 and Amendment 36 relating to Section 12 of the Equality Act 2006 are inseparable and must be considered as one.

The Minister went on to say that changing the monitoring duty,

“will also enable the EHRC to gain the respect hon. Members want it to have as our equality body and national human rights institution”.—[

Official Report

, 16/4/13; Commons, col. 217.]

This suggests a dangerous misunderstanding by the Government of the requirements of European Union law and the United Nations standards on the status and mandate of national human rights institutions. The likely effect of these proposals would be to prevent the commission, and therefore the UK, from complying with the requirement for equality and human rights bodies independently to monitor the national situation.

This could have very serious consequences. In the light of the Government’s package of reforms the international accreditation committee for national human rights institutions has announced that it will re-examine the commission’s status next month. I do not need to spell out to my noble friends the impact on the UK’s moral authority abroad if, as a direct consequence of these reforms, the commission were to lose its present A-accredited status. Such a development would no doubt be seized on by countries such as Zimbabwe and Iran. At a time when the UK is seeking a seat on the Human Rights Council that is not a risk we should be taking. I am sure noble Lords would agree that we must practise what we preach and lead by example.

The commission’s role as an agent of change matters to millions of people in this country, whether they are an elderly person in hospital, a woman fleeing a violent partner or a black teenager and his friend waiting for a bus. In a civilised society such as ours people in these vulnerable situations should feel confident that our institutions will accord them dignified and fair treatment as equal citizens. Justice is poorly served if our commitment to equality and human rights extends only to offering compensation after an event. For many, it is simply too late.

Today, of all days, we should remember why we put these measures in place and not be so foolish as to believe that it could never happen again. That is why, for the second time, I feel we must send these urgent messages to the other place that the general duty and the duty to monitor its aims must be taken very seriously and must stay. I beg to move.

Lord Low of Dalston: My Lords, I was sorry not to be here for Report stage of the Bill but I have read the debate carefully. It left no room for doubt as to the strength of support right across your Lordships’ House for retaining Section 3. In addition to the powerful and principled advocacy of the noble Baroness, Lady Campbell, and others, I attach particular importance to the comprehensive demolition of the Government’s case in legal terms by my noble and learned friend Lord Lloyd of Berwick.

22 Apr 2013 : Column 1286

Your Lordships will be pleased to hear that I do not propose to go over again all the substantive arguments again, which have been so comprehensively crawled over in Committee and on Report, about the value of duties that cannot be enforced in a court, for example, whether there is a place for the declaratory in legislation, the value of a unifying link between equality and other fundamental human rights—I was rather surprised that the Minister sought to deny that one in her wind-up—the fact that there is nothing in Section 3 that suggests or implies that the commission is to be solely or uniquely responsible for encouraging and supporting the goal of an equal society, the negative message sent by removing the general duty and so on. I think that these arguments have been comprehensively won.

7.45 pm

However, I want to repeat one point I made in Committee that I do not think has been properly answered, or indeed answered at all. The Government argue that Section 3 does not add anything to the EHRC’s core equality and human rights duties in Sections 8 and 9 but, as I explained in Committee, there are reasons for thinking that the repeal of Section 3 could make the commission’s duties at Sections 8 and 9 more vulnerable to judicial review on the ground of challenges based on the proper statutory remit of the commission.

In the absence of Section 3 there is little by which to judge whether the duties at Sections 8 and 9 are sufficient, as they become freestanding and detached from any specified outcomes or overarching purpose. The Minister said that no examples have been given of how the removal of Section 3 could undermine the commission’s ability to carry out its functions. I submit that it is a clear example if the removal of Section 3 would mean that the commission was more vulnerable to judicial review in carrying out its functions. I would be grateful if the Minister could deal with this point before she asks your Lordships to accept the Commons disagreement with your Lordships’ amendment.

What we have to decide today is not on these substantive arguments but whether to ask the Commons to think again about this matter. I think we should do this for four reasons, which I will briefly state. First, the public have shown in their response to the Government’s consultation that they are against repealing the commission’s general duty by six to one. Secondly, a large number of civil society organisations including Age UK, the Equality Trust, the Fawcett Society, Justice, Mind and the Refugee Council have expressed their opposition to repeal, indicating that it would leave the EHRC a weaker body if Section 3 were no longer in place. Thirdly, there is the cursory nature of the Commons rejection of our amendment. It was rejected in the briefest of exchanges, which scarcely sought to answer the arguments advanced but simply reiterated the arguments that had already been answered. Fourthly, and this is perhaps the most important, the Minister said on Report,

“I shall be absolutely clear about what this Government seek to achieve via this Bill. We want a strong and independent Equality and Human Rights Commission which promotes and protects equality and human rights”.—[Official Report, 4/3/13; col. 1289.]

22 Apr 2013 : Column 1287

This was echoed by the Minister in another place when she said,

“we want a strong, independent Equality and Human Rights Commission”.—[

Official Report

, Commons, 16/4/13; col. 217.]

The Government’s credibility is on the line here. If they want a strong and independent Equality and Human Rights Commission that promotes and protects equality and human rights, why should they not agree to this amendment? I know that they think that the general duty adds nothing to what is there in other sections of the Act, and they have an argument, even if one disagrees with it. The Minister in the other place reeled off a string of about 10 duties that would still be present in the Act even if one removed Section 3, albeit in a fragmentary and unintegrated fashion. However, if the general duty adds nothing, equally it does no harm. It is perhaps a question of balance.

I put it to the Minister that, even from the Government’s point of view, it might be preferable, on balance, to accept the amendment. It is symbolic, and this has become a touchstone of the Government’s commitment. I therefore put it to the Minister that they would be much better advised just to accept the amendment and spare themselves a lot of aggro and ill feeling on the part of that considerable body of opinion that regards the general duty as intrinsic to an Equality and Human Rights Commission worthy of the name.

Baroness Thornton: My Lords, I will make some very short remarks because the noble Baroness, Lady Campbell, and the noble Lord, Lord Low, have more than adequately explained why we find ourselves in this rather unfortunate position—I agree with the noble Baroness, Lady Campbell—of asking the Government to look again and asking another place to take this back.

It is important also to say that one thing has changed since we discussed this in Committee and on Report. That is that the EHRC has given this matter some further reflection. I congratulate the noble Baroness, Lady O’Neill, because it is a sign of the maturity of the organisation that it has changed its view on this matter at least a small amount. I will read out a statement that was issued, and that is about the only thing I will say. The statement about the repeal of Section 3 on its website says:

“However, the debate in the Lords and commentary by parties have underlined the importance which is attached to the general duty. Many people clearly believe that, both in terms of the perceived mission and role of the Commission, and the coherence of the legislation, it is valuable to retain the general duty. Unless the government can provide additional robust reasons for removing the general duty in the current situation, our analysis suggests the case for removing the Lords’ amendment in the Commons has not been made. The Commission therefore continues to support retention of the general duty and maintaining the position established by the Lords”.

We know from the previous debates and from listening very carefully to what the Ministers in this place and in the other place have said that there is actually no robust case for the repeal of the general duty. Your Lordships’ House took that view by a majority of over 50 when this was discussed on Report. I put it to your Lordships’ House that the one thing that has changed is in favour of the retention of the general duty, and I hope that the Minister will now weigh this issue in the

22 Apr 2013 : Column 1288

balance and agree to leave Section 3 in place. Indeed, if the Government wish to review Section 3 or any other part of the equalities legislation then that should be done with prior consultation and the involvement of the Joint Committee on Human Rights. We on these Benches do not believe that that is desirable or necessary, but if it were to be done it should be done in a proper way, not as part of a Bill that addresses regulatory burdens on business and enterprise.

Lord Lloyd of Berwick: My Lords, the Minister has not advanced this evening any of the arguments that she advanced at the beginning of January for repealing Section 3 of the 2006 Act. I will therefore leave those arguments on one side.

Instead I will turn to the arguments advanced by the Minister in the other place. He asserted boldly that Section 3 of the 2006 Act should be repealed because it was not a core purpose of that Act. With great respect, that is exactly what it was. Section 3 was in a sense the core purpose of the 2006 Act, that purpose being to bring together for the first time in legislation equality rights with other fundamental human rights. The specific duties under Sections 8 and 9 were to be the means of bringing about that core purpose. That was the very point made by Professor Sir Bob Hepple in his report. He said that Section 3 is important because it states for the first time what he called the “unifying principle”. It is most unfortunate that the Minister in the other place, when he came to his reply, did not reply to that argument or to any of the arguments advanced in the other place; sound arguments and convincing arguments, they were all, unfortunately, left aside because there was no time to deal with them.

There is a hint, elsewhere in what the Minister said, that Section 3 is undesirable because it would, as it were, take the commission’s eye off the ball to the exclusion of the important duties under Sections 8 and 9. There was never much danger of that. In any event, the commission has now made it clear, if I am right, that it would now welcome the retention of Section 3. If that be so, surely we should leave it at that.

It is not often on these occasions that we should resist the view of the House of Commons at this stage of ping-pong. However, the Government have not given one single solid reason why we should repeal a provision that both Houses were in agreement on as recently as 2006. As I have said, the Minister did not deal with any of these arguments in his reply. We should give him another opportunity of doing so, and another opportunity to the other place to see if they agree with those arguments or not. For that reason, I will vote for the amendment in the name of the noble Baroness, Lady Campbell.

Baroness Hussein-Ece: My Lords, I pay tribute to the work and the steely determination of the noble Baroness, Lady Campbell. She has been inspirational in her continuing support for what she believes to be an important principle and issue. Many of us share her passion and determination.

It is very poignant that today we are again debating the general duty of the Equality and Human Rights Commission and its principle on the 20th anniversary

22 Apr 2013 : Column 1289

of the terrible racist murder of 18 year-old Stephen Lawrence, and on the day of the memorial service that was held this afternoon in his memory, which I understand was attended by the Prime Minister and others.

Last month at an event to launch a book about the Macpherson inquiry, Doreen Lawrence said that, as a mother, for 20 years she had not been able to grieve and find closure because she had been forced to fight for justice, year after year. There are still individuals out there today who were involved in this murder and who have not been brought to justice. She wrote to the Prime Minister last November asking that he does not row back or seek to water down hard fought equalities legislation that all political parties came together to put on the statute book so recently to protect those who need protecting.

Huge progress has been made over many decades, particularly since, for example, my own family came to the United Kingdom, when racism and discrimination was rife. However, there is still much to do to ensure that our society becomes more equal, and that we maintain and build on such positive work, particularly since the Macpherson inquiry and its findings. It is irrefutable that more than a decade later, the Macpherson inquiry can rightly claim to have led to an overhaul of Britain's race relations legislation which created much stronger anti-discrimination powers that can be found anywhere in western Europe. Attitudes towards racism and policing have now changed as a result. However, there are still very many people and communities who need to be protected and encouraged to achieve their potential and not be limited by prejudice or discrimination. We need the commission to have the tools, the ability and the duty to monitor the progress in our society.

8 pm

For these reasons I profoundly disagree with the Government’s reasoning that they wish to repeal the general duty that originated as part of their Red Tape Challenge. That is why it has been included in this Bill, on the basis that it is a,

“vague, unnecessary and obsolete provision from the Equality Act 2006”.—[

Official Report

, Commons, 16/4/13; col. 225.]

This is not red tape, and it costs business nothing. Where is the evidence of that? It is about vision and about the mission, principles that matter and are important. We cannot risk sliding back if we become complacent on these defining principles.

We have also been told that the commission’s duties are too broad and wide-ranging and therefore cannot focus on its work. The Minister repeated that today, and I am sure that she will say it again in the summing up. Is the Minister aware that the general duty has considerable symbolic importance and, like any major organisation, it encapsulates what it is there for and what it is meant to do and its responsibilities? Do we really want to dilute the work and the remit of the EHRC after it has already faced cuts of around 60%?

The Minister has said that the general duty dilutes its purpose; there is no evidence of this. I argue that we should not remove it, as others have done. We must still do all we can to ensure that there is respect and protection for each individual's rights and dignity, as

22 Apr 2013 : Column 1290

well as an equal opportunity to participate in society. There is no evidence, and none has been forthcoming, that by abolishing the general duty the commission will somehow be able to work more efficiently. It would risk the commission losing all credibility as the well respected and trusted human rights organisation that we have repeatedly heard the Government want it to become.

As has already been said in the arguments on this matter in both Houses and outside Parliament, the commission itself has now concluded that unless the Government can provide additional robust reasons for removing the general duty, which so far they have not done, the case for removing it has not been made. Surely we should be promoting good relations and mutual respect between able and disabled people, and between people of differing races and faiths. It is therefore appropriate and welcome that the board has now come to a collective view on this matter.

Campaigning for greater equality is at the heart of my own political beliefs and is why I became engaged in politics and in public life. I strongly believe that it would be extremely damaging for us as a country and society if we are seen to be rolling back on equality. Transparency, scrutiny and accountability remain the watchwords. Retaining the general duty is one key element of these, where we strive to become a society that values social justice and promotes greater equality. I therefore ask noble Lords to support the amendment in the name of the noble Baroness, Lady Campbell, and send a strong message to the other place that the general duty does matter.

Lord Cormack: My Lords, whether it is a runner wearing a black ribbon in a marathon or a coffin draped in the Union flag, there is a real and proper place for symbolism. If this is all that we are debating, why on earth are we removing this particular symbol? In our last debate at Report, I abstained, feeling slightly guilty, I have to admit. One reason I abstained was that the commission had not come out with a clear, unequivocal statement such as has been quoted by the noble Baroness from the opposition Front Bench this evening. If the commission believes that having this symbolic duty does not retard its work or its progress, and if it believes that it is a declaration—and there is room for the declaratory as well as the symbolic—and that this is helpful to its work, with all the respect that I have for the noble Baroness, Lady O’Neill, and all the belief that I have in her capacity and competence, I can think only that she and her colleagues can be helped.

I wish we had no need for such a commission; I am sure we all wish that. It is one body that we would like to see work itself out of a job. Unfortunately, society as it is means that there is a need. If there is a need, there is a need to define. If there is a need to define, there is a need to say, in broad and simple terms, what the commission should be for and what it should be doing.

I admire greatly the noble Baroness, Lady Campbell. We know it is not easy for her to address this House. She does so with courage and most articulately. The case that she made this evening and that was so ably

22 Apr 2013 : Column 1291

backed by the noble Lord, Lord Low of Dalston—we are pleased to see him back from his recent operation—was frankly an unanswerable case. I have to say to my noble friend who will respond to this debate: why? What is the point? What is the purpose? There are occasions when a Government have to fight for something that may be unpopular. I have gone into the Lobbies supporting Governments fighting for things that have been unpopular for over 40 years. Nevertheless, this is asked for by those bodies with which the commission has regular dealings. It is not going to add to the sum from the public purse. It is not going to obstruct the commission in the specific duties which it has to follow. So what is the point and what is the purpose of doing this?

In following up a point made by the noble Lord, Lord Low of Dalston, I have also to say that the other place, of which I was proud to be a Member for 40 years, has not exactly examined this matter with critical care and scrutiny. It has given it a quick turnover and sent it back. Well, at the end of the day, the view of the Commons, as the elected House, prevails; that is my constitutional view. However, I think we have to say to it again, “Look, you have got this wrong. Including this section is not going to impede the Government in their work. It is not going to do any damage to your economic strategy. It is not going to do any damage to your social strategy. What it is going to do is to give the commission what it believes to be helpful and necessary on what those bodies which deal with the commission believe the commission should have”.

I did abstain last time; I shall not abstain tonight. I hope that we can send a clear signal to the other place that it should back down, come off it and do something sensible.

Baroness Stowell of Beeston: My Lords, I am grateful for all contributions to this debate, and I mean that quite sincerely. As I respond, I am very conscious of the strength of opinion that has been expressed in your Lordships’ House this evening.

I will start by responding to a point raised by the noble Baroness, Lady Campbell of Surbiton, in response to my remark about us all wanting the commission to be as effective as it can be so that it is respected by everyone. I want to clarify what I mean by that because I think there are two separate issues here. One concerns the ICC’s status, or the commission’s A status being conferred on it by the ICC, and any suggestion that that is at risk. I reassure the House that the Government have had ongoing discussions with the ICC. I know that the chairman of the commission—the noble Baroness, Lady O’Neill—is continuing her dialogue with the ICC. The non-legislative changes that we have made around the budget and the framework document all strengthen the situation with regard to its status. I do not think that that is at risk. In talking about respect, I was trying to get at a slightly different point in that I want the Equality and Human Rights Commission to be respected not just by those of us who automatically take very seriously equality and human rights but also by those who do not. In order for us to create the kind of society that we are talking about in this context, we need the commission to be supported by everyone.

22 Apr 2013 : Column 1292

That takes me to another point that the noble Baroness, Lady Campbell, raised, and was echoed by my noble friend Lady Hussein-Ece, on the origins of Section 3 and the general duty. Today marks 20 years since the tragic murder of Stephen Lawrence. I cannot express to the House how much respect I have for Doreen Lawrence, who had to suffer the murder of her son for progress to be made in this country on some equality issues. That is beyond words. I pay tribute to everything that she has achieved and wish that she had not had to suffer in the way that she did in order to achieve what she has. However, I say with the greatest respect to the noble Baroness, Lady Campbell, and others who referred to the death of Stephen Lawrence in the context of the general duty, that that tragedy resulted in the introduction of the public sector equality duties in the Equality Act 2010. That terrible event did not result specifically in Section 3 and it is important to be clear on that point.

The noble Baroness, Lady Campbell, referred to reporting and monitoring. It is clear that the general duty then becomes a practical issue because the Act states that the commission is required to monitor that general duty and report on it. The noble Baroness suggested that by changing the monitoring requirements the commission would no longer be able to hold up a mirror to society and would be able only to hold up a mirror to itself in terms of what was happening when it produced its reports. I absolutely disagree with that. In my opening remarks, I made it clear that the new monitoring requirements would allow the commission to continue to hold up a mirror to society. It is our view that the new monitoring requirements will lead to a much more focused report, which we hope will have greater value for Parliament and other bodies that may want to refer to it.

The noble Lord, Lord Low, asked whether, in the absence of Section 3, the commission might be more open to judicial review as regards its work under Sections 8 and 9. The commission has never raised this concern in its briefings on the duty. We have no reason to think that the detailed and clear duties in Sections 8 and 9 would be made any more vulnerable by the removal of the general duty.

The noble and learned Lord, Lord Lloyd of Berwick, mentioned the advice given by Sir Bob Hepple and the Government’s response to his view. I say two things to the noble and learned Lord. First, at earlier stages of the Bill, we heard from the noble Lord, Lord Lester, a contrary view to that expressed by Sir Bob Hepple about the role of Section 3. Further, in our view, there is no indication that Section 3 has any interpretative value in relation to any other legislation, including the Equality Act 2010 and the Human Rights Act 1998.

The noble Baroness, Lady Thornton, and others pointed to the commission’s recent briefing and its statement that it supports maintaining the position established by the Lords for retaining its general duty. In response, I acknowledge that that is what the commission has said publicly and I understand and respect that view. However, in the same briefing paper it has also made it clear that removing the general duty would not affect the commission’s ability to do its work. On those matters, it is worth making it clear

22 Apr 2013 : Column 1293

again that by removing the general duty we are not preventing the commission doing any of its very important and good work. It will not lose any of its vital powers of promoting equality, tackling discrimination and promoting human rights. As I have already said, when it comes to monitoring, producing quinquennial reviews in future should lead to it providing something more analytical and of greater value to those who want to use it as reference.

As I said when I first stood up, I am very aware of the strength of views expressed around this House. This is an issue where the noble Baroness, Lady Campbell, supported by all those who spoke tonight, feels differently from the Government. I have tried to set out again why the Government feel that this change will lead to a stronger Equality and Human Rights Commission, which is what we really want. When we come on to the next discussion about caste discrimination I will be able to reflect how important the role of the Equality and Human Rights Commission is. I ask your Lordships to agree with the Commons in their disagreement of the Lords amendment and the noble Baroness to withdraw her Motion

Baroness Campbell of Surbiton: My Lords, I would like to thank the Minister for her reply and to thank noble Lords who have contributed to this debate, the last debate, the one before it and the one before that. I have never worked so hard to protect a piece of legislation which the majority of people want and about which so many noble Lords from all sides of the House have spoken in favour. I find it quite incredible that something so symbolic and so important to the proper functioning of the Equality and Human Rights Commission has been such hard work.

I do understand that there has been improved mutual respect between the Government and the commission and the quality of the work has been enhanced. That is to be celebrated, but I still believe it is critical to retain the general duty and the monitoring duty for all the reasons that we have given in these debates since last year. I would like to thank the noble Lord, Lord Low, and the noble and learned Lord, Lord Lloyd, for helping me tonight to expand the arguments for the general duty. It would be wrong to rehearse them again now: we have exhausted them. I was particularly pleased to hear the noble Lord, Lord Cormack, express his passion and his very clear understanding of why the general duty is necessary to the work of the Equality and Human Rights Commission and also to the messages that we send out to the Lawrence family, to disabled people who are undergoing considerable difficulties in situations where, without a culture change, they will continue to be abused in institutions, and to others that we have mentioned throughout these debates. For them, I ask your Lordships to agree with my amendment tonight and to send it back to the Commons saying, “Please consider these arguments”, because they were only looked at in a very cursory way during the Commons debate. In fact, I believe the debate suffered a guillotine in the winding-up speech only three minutes after the Minister stood up. I ask the House to send this amendment back so that a proper

22 Apr 2013 : Column 1294

debate can be had and the arguments examined properly. I ask your Lordships to agree to this Motion. I wish to test the opinion of the House.

8.23 pm

Division on Motion A1

Contents 210; Not-Contents 180.

Motion A1 agreed.

Division No.  2

CONTENTS

Adams of Craigielea, B.

Addington, L.

Adonis, L.

Alton of Liverpool, L.

Andrews, B.

Armstrong of Hill Top, B.

Avebury, L.

Bach, L.

Bakewell, B.

Barker, B.

Bassam of Brighton, L.

Beecham, L.

Benjamin, B.

Berkeley, L.

Best, L.

Billingham, B.

Bilston, L.

Blackstone, B.

Blood, B.

Boateng, L.

Borrie, L.

Bradley, L.

Bragg, L.

Brinton, B.

Brooke of Alverthorpe, L.

Brookman, L.

Campbell of Surbiton, B.

Campbell-Savours, L.

Carter of Coles, L.

Clark of Windermere, L.

Clarke of Hampstead, L.

Clement-Jones, L.

Clinton-Davis, L.

Collins of Highbury, L.

Cormack, L.

Corston, B.

Cotter, L.

Davidson of Glen Clova, L.

Davies of Oldham, L.

Dean of Thornton-le-Fylde, B.

Desai, L.

Dholakia, L.

Donaghy, B.

Donoughue, L.

Doocey, B.

Drake, B.

Dubs, L.

Elystan-Morgan, L.

Evans of Temple Guiting, L.

Exeter, Bp.

Falconer of Thoroton, L.

Farrington of Ribbleton, B.

Faulkner of Worcester, L.

Fearn, L.

Filkin, L.

Finlay of Llandaff, B. [Teller]

Flather, B.

Foster of Bishop Auckland, L.

Foulkes of Cumnock, L.

Freyberg, L.

Gale, B.

Gibson of Market Rasen, B.

Gordon of Strathblane, L.

Gould of Potternewton, B.

Grantchester, L.

Griffiths of Burry Port, L.

Grocott, L.

Hanworth, V.

Hardie, L.

Harries of Pentregarth, L.

Harris of Haringey, L.

Harrison, L.

Hart of Chilton, L.

Haworth, L.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Henig, B.

Hereford, Bp.

Hilton of Eggardon, B.

Hollins, B.

Hollis of Heigham, B.

Howarth of Newport, L.

Howe of Idlicote, B.

Howells of St Davids, B.

Hughes of Stretford, B.

Hughes of Woodside, L.

Hunt of Kings Heath, L.

Hussain, L.

Hussein-Ece, B.

Jay of Paddington, B.

Joffe, L.

Jones of Whitchurch, B.

Jones, L.

Jordan, L.

Judd, L.

Kennedy of Southwark, L.

Kennedy of The Shaws, B.

Kerr of Kinlochard, L.

Kidron, B.

Kilclooney, L.

King of Bow, B.

Kinnock of Holyhead, B.

Kinnock, L.

Kirkhill, L.

Knight of Weymouth, L.

Layard, L.

Lea of Crondall, L.

Leitch, L.

Liddell of Coatdyke, B.

Liddle, L.

Lipsey, L.

Lister of Burtersett, B.

Lloyd of Berwick, L.

Low of Dalston, L.

McAvoy, L.

McConnell of Glenscorrodale, L.

McDonagh, B.

Macdonald of Tradeston, L.

22 Apr 2013 : Column 1295

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

Mackenzie of Framwellgate, L.

McKenzie of Luton, L.

Mallalieu, B.

Martin of Springburn, L.

Masham of Ilton, B.

Massey of Darwen, B.

Maxton, L.

Meacher, B.

Mitchell, L.

Monks, L.

Moonie, L.

Morgan of Drefelin, B.

Morgan of Ely, B.

Morgan of Huyton, B.

Morgan, L.

Morris of Aberavon, L.

Morris of Handsworth, L.

Morris of Yardley, B.

Noon, L.

Nye, B.

O'Loan, B. [Teller]

O'Neill of Clackmannan, L.

Palmer, L.

Pannick, L.

Parekh, L.

Patel of Bradford, L.

Patel, L.

Pendry, L.

Phillips of Sudbury, L.

Pitkeathley, B.

Plant of Highfield, L.

Ponsonby of Shulbrede, L.

Prosser, B.

Puttnam, L.

Quin, B.

Radice, L.

Reid of Cardowan, L.

Rendell of Babergh, B.

Rennard, L.

Richard, L.

Richardson of Calow, B.

Roberts of Llandudno, L.

Rooker, L.

Rosser, L.

Rowe-Beddoe, L.

Rowlands, L.

Royall of Blaisdon, B.

Sawyer, L.

Sherlock, B.

Simon, V.

Singh of Wimbledon, L.

Skidelsky, L.

Smith of Basildon, B.

Smith of Finsbury, L.

Smith of Gilmorehill, B.

Snape, L.

Soley, L.

Steel of Aikwood, L.

Stern, B.

Stevenson of Balmacara, L.

Strasburger, L.

Symons of Vernham Dean, B.

Taylor of Blackburn, L.

Taylor of Bolton, B.

Temple-Morris, L.

Thomas of Gresford, L.

Thornton, B.

Tonge, B.

Touhig, L.

Triesman, L.

Tunnicliffe, L.

Turnberg, L.

Turner of Camden, B.

Wall of New Barnet, B.

Walpole, L.

Warwick of Undercliffe, B.

Watson of Invergowrie, L.

West of Spithead, L.

Wheeler, B.

Whitaker, B.

Whitty, L.

Wigley, L.

Wilkins, B.

Williamson of Horton, L.

Wills, L.

Winston, L.

Wood of Anfield, L.

Worthington, B.

Young of Norwood Green, L.

NOT CONTENTS

Ahmad of Wimbledon, L.

Alderdice, L.

Allan of Hallam, L.

Anelay of St Johns, B. [Teller]

Ashdown of Norton-sub-Hamdon, L.

Ashton of Hyde, L.

Astor of Hever, L.

Attlee, E.

Bates, L.

Berridge, B.

Black of Brentwood, L.

Blencathra, L.

Bonham-Carter of Yarnbury, B.

Bottomley of Nettlestone, B.

Brabazon of Tara, L.

Bridgeman, V.

Brittan of Spennithorne, L.

Brougham and Vaux, L.

Browne of Belmont, L.

Browning, B.

Burnett, L.

Buscombe, B.

Byford, B.

Caithness, E.

Cathcart, E.

Cavendish of Furness, L.

Chadlington, L.

Chalker of Wallasey, B.

Chidgey, L.

Colwyn, L.

Cope of Berkeley, L.

Courtown, E.

Craigavon, V.

De Mauley, L.

Deben, L.

Deighton, L.

Denham, L.

Dixon-Smith, L.

Dobbs, L.

Dundee, E.

Eaton, B.

Eccles of Moulton, B.

Eccles, V.

Eden of Winton, L.

Elton, L.

Empey, L.

Falkner of Margravine, B.

Faulks, L.

Feldman of Elstree, L.

Fellowes of West Stafford, L.

Fink, L.

Flight, L.

Fookes, B.

Forsyth of Drumlean, L.

22 Apr 2013 : Column 1296

Fowler, L.

Framlingham, L.

Fraser of Carmyllie, L.

Freud, L.

Garden of Frognal, B.

Gardiner of Kimble, L.

Gardner of Parkes, B.

Garel-Jones, L.

Geddes, L.

Glenarthur, L.

Glendonbrook, L.

Goodlad, L.

Goschen, V.

Green of Hurstpierpoint, L.

Greenway, L.

Hanham, B.

Harris of Peckham, L.

Harris of Richmond, B.

Henley, L.

Higgins, L.

Hill of Oareford, L.

Hodgson of Astley Abbotts, L.

Home, E.

Hooper, B.

Howe of Aberavon, L.

Howe, E.

Hunt of Wirral, L.

Inglewood, L.

Jenkin of Kennington, B.

Jenkin of Roding, L.

Jolly, B.

Jones of Cheltenham, L.

King of Bridgwater, L.

Kirkham, L.

Kirkwood of Kirkhope, L.

Knight of Collingtree, B.

Lamont of Lerwick, L.

Lang of Monkton, L.

Lawson of Blaby, L.

Lee of Trafford, L.

Lexden, L.

Lindsay, E.

Lingfield, L.

Liverpool, E.

Loomba, L.

Lucas, L.

Luke, L.

Lyell, L.

McColl of Dulwich, L.

MacGregor of Pulham Market, L.

Mackay of Clashfern, L.

MacLaurin of Knebworth, L.

Maddock, B.

Magan of Castletown, L.

Mancroft, L.

Marland, L.

Marlesford, L.

Mawson, L.

Mayhew of Twysden, L.

Montrose, D.

Morris of Bolton, B.

Moynihan, L.

Naseby, L.

Nash, L.

Neville-Jones, B.

Newby, L. [Teller]

Newlove, B.

Noakes, B.

Northbrook, L.

Northover, B.

Norton of Louth, L.

O'Cathain, B.

Palumbo, L.

Parkinson, L.

Parminter, B.

Perry of Southwark, B.

Popat, L.

Randerson, B.

Rawlings, B.

Razzall, L.

Ribeiro, L.

Risby, L.

Roper, L.

Sassoon, L.

Seccombe, B.

Selborne, E.

Selkirk of Douglas, L.

Selsdon, L.

Shackleton of Belgravia, B.

Sharples, B.

Shaw of Northstead, L.

Sheikh, L.

Shephard of Northwold, B.

Shipley, L.

Shutt of Greetland, L.

Skelmersdale, L.

Soulsby of Swaffham Prior, L.

Spicer, L.

Stedman-Scott, B.

Stewartby, L.

Stoneham of Droxford, L.

Stowell of Beeston, B.

Taverne, L.

Taylor of Goss Moor, L.

Taylor of Holbeach, L.

Tope, L.

Trefgarne, L.

Trenchard, V.

Trimble, L.

True, L.

Tugendhat, L.

Ullswater, V.

Vallance of Tummel, L.

Verma, B.

Waddington, L.

Wakeham, L.

Waldegrave of North Hill, L.

Wallace of Saltaire, L.

Wallace of Tankerness, L.

Warsi, B.

Wasserman, L.

Watson of Richmond, L.

Wheatcroft, B.

Wilcox, B.

Willis of Knaresborough, L.

Younger of Leckie, V.

8.35 pm

Lords Amendment 36: Clause 56, page55, line 8, leave out subsection (6).

Commons disagreement and reason

The Commons disagree to Lords Amendment No. 36 for the following Reason—

36A: Because it is more appropriate for the Commission for Equality and Human Rights to monitor progress by reference to its duties under sections 8 and 9 of the Equality Act 2006.

22 Apr 2013 : Column 1297

Motion B

Moved by Baroness Stowell of Beeston

That this House do not insist on its Amendment 36, to which the Commons have disagreed for their Reason 36A.

Motion B1

Moved by Baroness Campbell of Surbiton

As an amendment to Motion B, leave out from “House” to end and insert “do insist on its Amendment 36”.

Motion B1 agreed.

Lords Amendment37: After Clause 56, insert the following new Clause—

“Equality Act 2010: caste discrimination

(1) The Equality Act 2010 is amended as follows.

(2) After section 9(1)(c) (race) insert—

“(d) caste;”.”

Commons disagreement and reason

The Commons disagree to Lords Amendment No. 37 for the following Reason—

37A: Because it is inappropriate to provide for caste to be an aspect of race for the purposes of the Equality Act 2010 without further consultation.

Motion C

Moved by Baroness Stowell of Beeston

That this House do not insist on its Amendment 37, to which the Commons have disagreed for their Reason 37A.

Baroness Stowell of Beeston: My Lords, we come now to the issue of caste and whether it should be made an aspect of race and thus a protected characteristic under equality law.

The whole House agrees that prejudice and discrimination based on caste is wrong. It is unfair and unacceptable in a modern society and is certainly unacceptable in Britain. There is no place for it and we need to take the right action to ensure that there is no place for it. It was your Lordships’ view when we last debated this that caste should be directly and immediately included in the Equality Act as an aspect of race. The other place has taken a different view and said we should not legislate at all without further consultation. There has, as yet, never been a full public consultation on this issue.

I will be absolutely clear. The Government have listened to what your Lordships’ House has said. We acknowledge the widespread support among noble Lords for legislation and the strength of opinion that has already been expressed. Today, I will explain the additional steps the Government are taking in response to the strength of that opinion. Since we last debated this matter, significant concerns have also been expressed about the implications of legislation. These concerns have not come only from those we would expect to be against legislation. Her Majesty’s Opposition also raised

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legitimate and serious questions during the debate in the other place. As I said during our earlier debates, this Government are not against legislation as a way of tackling caste discrimination. However, we do not have all the information that we believe is necessary to decide that the power in the Equality Act 2010 should be exercised. We think a responsible Government should consider all relevant issues and the implications of legislation before going down that route.

During our previous debate, my noble and learned friend Lord Mackay of Clashfern suggested that having the provision for caste in the Equality Act had given the courts reason, which they might not otherwise have had, to doubt whether the existing legislation protects people against caste discrimination. This helps to illustrate a very important point. We must ensure that whatever we do next does not create new, unintended consequences which could make it harder for people to seek redress. However, at the same time, we must of course be conscious of the need to bring what we do next to a conclusion as quickly as possible.

If we are able, shortly, to reassure ourselves on these points and decide, after consultation, to exercise the power that already exists in the Equality Act, then an advantage of this power is that we can do so via secondary legislation. In other words, I want to reassure your Lordships that there need not be a requirement for new primary legislation and therefore any unnecessary delay. I should note, however, that the amendment brought before the House today would not permit any meaningful public consultation or allow any flexibility through secondary legislation in the way that the Opposition, among others, have been arguing. Caste would simply join colour, nationality and ethnic origin as an aspect of race in the Act, and that would be that.

In a moment I will explain what additional information and steps we think are necessary before the Government will decide, and what the timescale is for that decision. First, I shall summarise some of the concerns that have been raised. First, there are concerns about whether we are actually legislating on the right ground. Some organisations have suggested that descent is more appropriate than caste, and this is an issue that the Opposition have also raised in debates in the other place. I am aware that there are differing and strong views on the question of descent, which we cannot go into today. However, the fact that there is genuine uncertainty over the definition of what we are legislating about clearly suggests that we should not be adding further to the law before carrying out the sort of consultative process proposed by both the Government and the Opposition, although I acknowledge that the Opposition have a different proposal in terms of consultation.

There are also concerns about individuals having to indicate their caste in any monitoring. The NIESR report is clear that some people would not want to do this or indeed admit to caste existing at all. We all have to consider what business would need to do to comply sensibly with such a provision and, if so, what costs this would entail. Would there need to be a code of practice, and if so, would it be reliable in such sensitive matters? To take one important stakeholder in this area, the CBI has stated that,

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“on this terribly complex issue time must be taken in order to craft the right intervention, rather than rushing the process in order to comply with the timetable of the ERR Bill”.

At the moment, I believe it is not clear that we have all the information that we need on these and other questions. A significant number of Hindu and Sikh organisations, including some representing people from the perceived lower castes, have expressed concerns that they have not had a chance to provide considered views and would be strongly opposed to immediate legislation on this. For example, the GAKM UK which represents the Mochi community, which is deemed one of the lower castes, believes that by enacting the clause in law, the Government could undo all the work done by our communities over the past 20 years to try to remove the differentiation by caste in all aspects of life.

I am, of course, aware that some noble Lords may say that this is the sort of argument that could have been used to delay the advent of race or indeed of any other discrimination law. However, there is a fundamental difference with caste in that not only do we wish to get rid of caste prejudice from British society, we actually see no useful value in caste itself, or of anyone defining themselves by their caste. In that sense it is not like colour or ethnic origin, or any of the other protected characteristics. We need to ensure that the action we take, particularly if in legislation, sets us towards this aim and not in the opposite direction of embedding caste as a concept in domestic law.

As your Lordships will be aware, on 1 March this year, the Government announced a programme of educational work within the affected communities. At that time we also said that the Equality and Human Rights Commission will investigate the right way of tackling the problem of caste prejudice and discrimination, using the evidence in the NIESR report and earlier material from ACDA and other groups as its starting point. In last week’s debate in the other House, the Minister for Women and Equality announced that in parallel with this work a public consultation will be undertaken on the use of the caste power in the Equality Act. As I have already stated, a full, balanced public discussion is something that has not previously happened, and we think it is crucial that it now does so.

8.45 pm

I should like to give your Lordships more detail about this consultation. The Government intend to start the consultation before the Summer Recess and finish it before the end of this year. In the same timescale, as I have already mentioned, the Equality and Human Rights Commission will investigate independently the right way of tackling the problem we see in the evidence presented by NIESR and other studies. We have always accepted that the NIESR report identified a small number of cases where the evidence suggested that caste discrimination or harassment had probably occurred. I should therefore explain that the initiatives we are proposing are specifically intended to supplement the NIESR report by dealing with two key aspects which that report did not fully address. The EHRC will look, in the light of the evidence from existing studies, at what is the right way—legislative or otherwise—of tackling caste prejudice and discrimination.

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We are pleased that the commission, as our country’s designated equality body and human rights institution, chaired by the noble Baroness, Lady O’Neill of Bengarve, will be playing a key role in the work on this very difficult and controversial problem in modern British society.

The consultation will seek views widely from all individuals and groups with an interest in caste and the problems it creates. It can of course raise those issues, and others that I have just mentioned as causing particular concern to Hindu and Sikh groups, with businesses and other interests which have not previously been involved in this debate. Apart from the Government’s own assessment of the consultation responses, we are certainly happy to share that material with the EHRC once the consultation closes. The EHRC can then reach its own conclusions and recommendations in full awareness of what respondents to the consultation have been telling us.

We should have the outcome of the consultation and the commission’s own conclusions and any recommendations it may have for Government by the end of the year and we will publish the Government’s response early next year. If it is clear from this assessment that legislating is necessary, the Government will then take steps to do that. No Government can give away their legislative responsibilities. However, if the report from the Equality and Human Rights Commission—a body uniquely qualified to take a view on anti-discrimination law—makes a firm recommendation to legislate, that would be a key element in forming the Government’s decision.

I am grateful to noble Lords for allowing me the time to spell out what the Government are planning in response to the very strong feelings expressed by this House in previous debates on this matter. I trust that in doing so the House will agree that we should agree with the other place on this issue. I beg to move.

Motion C1

Moved by Lord Harries of Pentregarth

As an amendment to Motion C, leave out from “House” to end and insert “do insist on its Amendment 37”.

Lord Harries of Pentregarth: My Lords, I very much respect the fact that the Government are taking caste discrimination very seriously. I particularly thank the Minister for her personal concern and the moves that she has suggested this evening.

There is, however, a fundamental difference of approach between the Government’s present policy and that represented by supporters of this amendment. We believe that the time is already overdue for it to be clearly stated in law that discrimination on the grounds of caste in the public sphere, like any other form of discrimination, is totally unacceptable. It is quite contrary to the culture and values of our society and should be illegal—and seen to be illegal.

We are not talking about acts of personal prejudice in the social sphere, which may indeed be dealt with best by an educational process, but about what happens in the public sphere: the areas of education, employment

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and the provision of public goods and services. In the public sphere, it is the presence or absence of a law that makes all the difference.

The Government and Opposition have, rightly, been talking to people who are disquieted by the prospect of legislation. One point needs to be made quite clear: caste is primarily a social and cultural phenomenon and its presence is not confined to any one religion or indeed to a religious view at all. It can even infiltrate religions that are in principle totally opposed to all forms of caste discrimination. A few years ago, for example, the Pope had to warn Christian communities about the way in which the caste system had taken hold in certain congregations in the Indian subcontinent. It is in essence a social and cultural phenomenon, and this amendment should not in any way be taken as a criticism of any one religion.

I do not see how the Government’s Talk for a Change policy, in which they are investing £20,000, can possibly help present or future victims of discrimination. Basically, victims will continue to have no possibility of recourse to the law if they believe that they are being discriminated against not on the grounds of their religion but on the basis of their caste. The Minister in the other place said:

“Some discrimination cases can already be brought under employment law”.—[Official Report, Commons, 16/4/13; col. 220.]

The painful experience of those who have already tried to bring a case before an employment tribunal on the grounds of caste has shown that this is not possible, because at the moment there is no relevant legislation.

The Minister mentioned that a group describing itself as low-caste has written to her to express unhappiness about the prospects of legislation. Being a member of a lower caste within a hierarchy is different from being a Dalit, the former untouchables regarded as outside the hierarchy altogether and of whom there are many thousands in this country. They are the ones who are experiencing discrimination at the moment and in greatest need of protection by the law.

The Minister also suggested that it might be possible to use “descent” rather than “caste” in any possible legislation. That would be totally unacceptable to the communities most affected by discrimination; they have made that quite clear. The word “descent” is not clear and could, for example, be used by descendants of one Scottish clan to claim discrimination by members of another. If one looks into it, “caste” has a clarity about it.

All attempts to bring in equality legislation have met with initial opposition. For example, Fenner Brockway brought forward nine Private Members’ Bills to make racial discrimination illegal in the 1950s, and it took years for that and similar legislation on disability, religion and sexual orientation to make it to the statue book. Pressure for anti-caste discrimination legislation has been going on for many years and surely now is the time for it to become law.

The Minister has said that the Government are going to initiate a process of consultation but, with due respect, they have been considering this for more than two years and the previous Government had been considering it for two or three years before that.

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It is difficult to see what could be achieved by the consultation that the Minister has in mind, though there is a need for some kind of consultation, as I will mention. The Minister also said that she thought that there was a distinction in the legislation on race and caste, because the Government wanted to get rid of caste altogether. Like race, caste can be a form of acceptable identity. People call themselves black, brown, white or whatever they are, and I see no reason why people should not describe themselves as belonging to a particular caste, provided that in the public sphere it does not become the basis of discrimination against other people. I cannot accept that there is a fundamental difference there.

The Minister also mentioned the Equality and Human Rights Commission and the work that it is going to do, and I greatly respect the noble Baroness, Lady O’Neill, and the kind of mind that she can bring to this. It is already on record that the Equality and Human Rights Commission supports legislation, so it seems that nothing is really to be gained by putting the issue to the commission again.

I mentioned that it may be necessary for further consultation to take place with affected communities before the clause is enacted. The purpose of this would be to help dispel fears based on misunderstanding, of which there is a lot at the moment; make it crystal clear what counts as caste discrimination; and ensure that employers and public bodies will not seek information about caste identification, and that there will be no requirement on individuals to disclose their caste. The appropriate place for this, though, is in guidance or secondary legislation. At this stage we need a clear statement in law, even if a time is put on its enactment, in order to allow for that kind of specific and carefully defined consultation.

The Minister in the other place said:

“It is important to put it on the record that the Government recognise that cast prejudice remains in the UK, not least as outlined in the 2010 National Institute of Economic and Social Research report”.—[Official Report, Commons, 16/4/13; col. 219.]

She stated unequivocally that the Government are against caste discrimination of any kind and want to do something about it. If there is discrimination in the areas covered by the Equality Act, and the Government recognise that, it should not be countenanced but made illegal. I beg to move.

Lord Avebury: My Lords, I, too, welcome the forthright statement by the Minister that caste discrimination is unacceptable, unfair and must be eliminated. However, I disagree with the diagnosis that she offered, which involves a delay at least until the end of the year before anything positive is done. I think that your Lordships will agree with the noble and right reverend Lord, Lord Harries of Pentregarth, that, having spent three years since the Equality Act waiting for the Government to declare their intentions on Section 9(5)(a), which they could have invoked at any time during that period, it is now time for your Lordships to make a decision on how we deal with this matter in law.