Employee Shareholding and Participation in Corporate Governance

Baroness Vere of Norbiton Excerpts

Thursday 11th October 2018 Lords Chamber

[Baroness Vere of Norbiton (Con)]

My Lords, I thank the noble Lord, Lord Haskel, for securing this important and timely debate. Giving employees a stake and a voice in the organisation that they work for is important. As the noble Lord very powerfully noted in his opening remarks, it can lead to better outcomes for all stakeholders—employees, shareholders, customers, suppliers and, indeed, the Exchequer—through better-quality boardroom decision-making, stronger worker commitment to the business, higher productivity and greater influence of workers over the strategic decisions that will affect them. This has been noted by many people, not just in the Chamber today but outside. This debate is indeed very timely. The IPPR report has recently come out. It was mentioned by the right reverend Prelate and the noble Lord, Lord Stevenson.

We can all agree that employees are the lifeblood of all successful organisations and that their participation is crucial. Where I suspect we will disagree is on how government should encourage—some would prefer “force”—listed and non-listed privately owned companies to increase employee participation. Some in today’s debate—I note the comments of the noble Lord, Lord Stevenson—have criticised the speed at which the Government are acting. I cannot agree.

I will turn first to worker participation in corporate governance. As the noble Lord, Lord Stevenson, noted, the recent comments by Andy Haldane, the chief economist of the Bank of England, are welcome and timely. I am sure that noble Lords were very pleased to see his appointment as chair of the Industrial Strategy Council announced a few days ago. That council will meet for the first time in a couple of weeks’ time.

In 2016, we consulted on the Corporate Governance Reform Green Paper which, among many other things, sought views on how best to strengthen the worker voice in the boardroom. It was an extensive consultation. There were 375 thoughtful responses from businesses, trade unions and wider society. One thing was particularly striking from the responses: that no single way is the best way to strengthen the employee voice and influence at board level. Some companies favour the direct appointment of employees to company boards. Others favour dedicated and diverse workers’ councils which can reach into all aspects of the organisation. There is a huge range of approaches, each suiting the specific needs of the company, its structure and the sector in which it operates. So it became clear to us over the course of the consultation that one method would not suit all and that it would be wrong, and possibly quite damaging, for the Government to dictate a single method of worker participation.

[Lord Lea of Crondall]

Does the doctrine of diversity not mean that the Government are ruling out, almost for all time, any legislation?

[Baroness Vere of Norbiton]

Not at all—but at this moment legislation is not needed. If I am allowed to make a bit of progress I will explain how this is being put into practice.

Our reforms achieve change not by forcing companies into a one-size-fits-all approach but by providing options, supported by a clear and transparent accountability system. There are two main elements to our approach. First, we have put new reporting requirements on the statute book. They require all large companies—those with more than 250 UK employees—to explain in their directors’ reports how they have had regard to the interests of employees, including how they have engaged with them and, crucially, the effect of that engagement on decisions taken by the board during the year.

Secondly, at the Government’s request the Financial Reporting Council has revised the UK Corporate Governance Code to require boards to have in place at least one of three worker voice mechanisms: a director appointed from the workforce, a formal workforce advisory panel or a designated non-executive director. If a board has not chosen one of those methods, it will have to explain to its shareholders what alternative arrangements are in place and why they are effective.

The noble Lord, Lord Haskel, questioned the statutory underpinning of the code. It is mandatory for all listed companies. Noble Lords will be aware that Sir John Kingman is reviewing the FRC and all its activities, and we look forward to receiving his report in due course.

The Government expect these reforms to drive real change, with our large companies having effective mechanisms in place to engage with employees at boardroom level.

Many noble Lords on the Labour Benches have spoken in today’s debate and talked about Labour Party policy in this area. What do we see? We see exactly what the consultation showed us would not work. Labour is proposing a one-size-fits-all approach which we know will not suit many companies. Labour would force all large companies to do exactly the same thing, irrespective of their type, size, ownership and sector. For the reasons I have set out, we believe this would be wrong. Indeed, the personal experiences shared in the Chamber today by the noble Lord, Lord Monks, Lord Cotter, Lord Lea and Lord Davies, further support our view that one size simply does not fit all.

I turn to employee shareholding and ownership. Many businesses choose employee share ownership to involve and motivate their employees. But, crucially, employee share ownership must remain a free choice for businesses to make. However, the Government have a role to play. We can remove the barriers to employee shareholding and to employee ownership to make these easier for business. The Nuttall review in 2012, commissioned by the previous Government, identified three barriers to growth: a lack of awareness of the concept, a lack of resources to support implementation, and actual or perceived legal, tax or other regulatory barriers. The review made 28 recommendations, and these have been addressed by the Government in awareness-raising initiatives and by simplifying the relevant regulations through changes in the Finance Act 2014. So we have tackled the barriers; it is now up to the private sector to set this up and help employees to participate.

This Government back businesses, whichever ownership model they have. It is in that context that we keep under review our approach to employee share ownership schemes. I noted the comments by the noble Baroness, Lady Bowles of Berkhamsted. I have read her very good report, and one thing that struck me was that she said:

“That is not to say employee ownership is the ‘ideal’ business model, or that its impact is automatically and universally transformative”.


She is right, and that point was made also by the noble Lord, Lord Liddle. We have to be aware of people investing not only their job in a company but also perhaps their life savings.

However, we would like to see more employee-owned companies, and we have noted the recommendations. The Government keep all areas of the tax system under review and, I am sure, are looking at the proposal that the noble Baroness mentioned that was sent recently to HMT. We already offer four tax-advantaged employee share schemes that allow 4 million employees to invest in the future performance of their companies. This is alongside employee ownership trusts, which the Government have promoted since in 2014 and which offer generous tax reliefs both for employees and for business owners who sell to a trust.

Perhaps it is worth taking a moment to look at Labour Party policy in this area, which was cited by a number of noble Lords today. It is certainly radical. It would involve an immediate and significant diminution to the pension assets of all pension holders, and indeed anyone with any shares in a larger listed company. It would be an astonishing confiscation of private wealth. There would be no actual employee share ownership, merely ownership by proxy, and a cap on any upside for the employee. I wonder whether noble Lords on the opposition Benches have any estimate of quite how much extra tax the Exchequer would get as a result of this cap. Some say that it would be around £6 billion— that is, £6 billion of extra corporation tax targeted only at companies with a high dividend yield. The policy is extraordinary, and not in a good way. It would have a devastating impact on UK business and the UK as an attractive place to invest.

Noble Lords touched briefly on Section 172 of the Companies Act 2006, which is the cornerstone of the company law framework. Directors have a duty to promote the success of a company for the benefit of their shareholders. However, in doing so they must have regard to a range of stakeholders. This is the enlightened shareholder value model and we are not minded to review it at this time.

The UK has an international reputation for the strength of its corporate governance framework, which we have kept up to date with reviews and carefully considered improvements. As the noble Lord, Lord Monks, suggested, we will look at best practice in other countries, but a one-size-fits-all approach will not work.

Prisons: Rehabilitation

Baroness Vere of Norbiton Excerpts

Thursday 6th September 2018 Lords Chamber

[Baroness Vere of Norbiton (Con)]

My Lords, I congratulate the noble Lord, Lord Bird, on securing this debate and I greatly appreciate all contributions made by noble Lords. My officials have been very busy in scribbling answers. I have not a hope of getting through them all but I will make sure that all questions asked today are answered in writing.

Turning first to safety across the adult estate, particularly in male prisons, our first duty is to keep our staff and the people in our custody safe. To do this, we need to provide full and supportive regimes in a calm and civil environment. I agree with the right reverend Prelate the Bishop of Gloucester that perhaps there might even be a culture of hope. At the heart of this is the relationship between staff and prisoners. Prison officers must have the time and skills to support and incentivise the right behaviour, and to challenge and disincentivise poor behaviour. The second key factor is the availability of drugs, including new psychoactive substances, in our prisons.

On staffing, we have invested £100 million and we had hoped to recruit 2,500 new prison staff. We have not done so; we have recruited an additional 3,650 prison staff. Another 2,096 have job offers or are booked in for training. Furthermore, we are working hard on retaining and recognising our more experienced staff by making better use of financial incentives, including an above-average pay increase of 2.75%, improving opportunities for promotion and reviewing and strengthening learning and development opportunities for governors and, indeed, all officer grades. Having the right number of staff with the right skills and experience allows prisons to run full, high-quality regimes. It also means that we can more quickly roll out the offender management in custody scheme. OMiC provides each prisoner with a key worker model: a trained prison officer who meets with the prisoner one-to-one to discuss their opportunities for meaningful activity and any challenges they may be facing.

I agree with the noble Lord, Lord Harris, that all prisoners are somehow vulnerable. It is my belief that the OMiC system will help to identify those vulnerabilities and give those prisoners the support they need. They will have a named individual and the meetings will be regular. I would disagree with the comment made by the noble Baroness, Lady Jones, that prison officers do not have soft skills. They really do; furthermore, they are trained in those areas. There are 116 prisons in the country. OMiC has been fully rolled out in 10 of them and is under way at a further 50, so we are over halfway. Early and anecdotal feedback from prisons that have rolled this out completely, such as HMP Liverpool, is extremely positive, from both the staff and the prisoners.

However, safety is also impacted by the availability of drugs. We must spare no effort in rooting out this scourge because it impacts behaviour in our prisons. We have to tackle the use of drones and are investing in physical security countermeasures, such as netting, to frustrate their progress. We have to stop drugs being brought in on the bodies of visitors and are investing in high-tech body scanners. We have to find the drugs already in prisons and we have 300 specially trained sniffer dogs. We have to monitor ongoing drug use so we have introduced mandatory random drugs tests, including testing for psychoactive drugs. This is the first time that has happened in any country in the world. To smash the organised crime networks responsible for so much of the supply, as mentioned by my noble friend Lady Bottomley, we have specialised intelligence and disruption teams, which work very closely with law enforcement, and mobile phone blocking technology to prevent communications from inside the prison and those from the outside. Related to this, our corruption prevention units work very hard with local law enforcement to root out corruption among prison staff.

Over the summer our Prisons Minister, Rory Stewart, announced a number of initiatives. This was mentioned by many noble Lords. These included a flagship programme targeted at our 10 worst prisons. We are using these 10 prisons as a pilot group and investing £10 million to fight the scourge of drugs in them. They will serve as models of excellence, which we will roll out across the rest of the estate.

On rehabilitation, it is critical that we have full and supportive prison regimes in a calm and civil environment if rehabilitation is to be successful at all. We want prisoners, while in custody, to be able to learn and gain experience that will lead to them securing a job on the outside. No prisoner should be left behind. We should make sure that we do not leave behind even prisoners with learning difficulties, who perhaps cannot read, write or do basic maths when they get to prison. We must make sure that they are included in the learning and employment activities that we are now able to offer. We want them to have access to health providers, including drug rehabilitation services so that they can lead healthy, drug-free lives. We want them to maintain their relationships with their families and friends. We want them to get settled in accommodation and play a full and positive role in the community.

In the area of learning and gaining experience, in May we launched the education and employment strategy. It creates a system in which each prisoner is set on a path to employment. This is not a top-down, “every prison needs to do exactly the same thing” programme; we are empowering the governors and giving them responsibility for creating their own education and employment strategies locally. It will not work unless governors can engage with local employers and ensure that people have the skills for their local communities. So when people say, “Oh, there’s no strategy for the prisons”, in fact there are—the governors will make the strategy for their prison because that is right and they will have control of the budget.

On living a healthy and drug-free life, many noble Lords will know that the National Partnership Agreement for Prison Healthcare in England has recently been updated and is much more cohesive now. Health services in prisons and outside in the community work much more in co-operation. We recognise that suicide and self-harm remains a major challenge, as noted by the noble Lord, Lord Harris. Prison staff are receiving revised and improved suicide and self-harm prevention training. This is under way and has been completed by 17,000 staff to date. It is also important to note that we have acted on the vast majority of recommendations from the Prisons and Probation Ombudsman’s investigations of deaths in custody. Any death in custody is a tragedy, even more so if we do not learn from it.

On transitioning from prisons, as mentioned by the noble Lord, Lord Marks, the community rehabilitation companies have had mixed results. We are taking that bull by the horns and looking at the future and the way we work with them on their contracts. I am fairly sure that there will be more on that in due course, as we finalise exactly what we will be doing in future.

I turn briefly to young offender institutions. Many noble Lords have noted that the number of children and young people in those institutions has fallen dramatically. That is commendable but improvements still need to be made. We have the youth justice reform programme, which was launched in January last year. Again, we know that since then Her Majesty’s Inspectorate of Prisons has highlighted improvements in all the under-18 sites that it has inspected. We are also recruiting 120 extra staff into these institutions, including sports instructors, as noted by the noble Baroness, Lady Healy.

I am afraid I do not have time to go into great depth on the issue of women now but I will do so in my letter. The Female Offender Strategy was published in June and I will be able to provide much more information on that.

There is much more that I should like, and indeed need, to say, so I will set it out in writing. This is my third debate on prisons. The first was probably four and a half hours long. I never tire of this debate as it is an important subject. I am proud of the work that the Government are doing, and I hope noble Lords will have heard that we have lots of plans in place. We now need time for these plans to bed in, and I am confident of improvements. Once again, my heartfelt thanks to all contributors and, most of all, to the noble Lord, Lord Bird.

Northern England: Opportunity and Productivity

Baroness Vere of Norbiton Excerpts

Thursday 12th January 2017 Lords Chamber

[Baroness Massey of Darwen (Lab)]

My Lords, I am pleased to introduce this debate as a proud Lancastrian and therefore a northerner. I am someone who also cares about deep divisions, any sort of division, in our society.

The so-called northern powerhouse must not just be a catchy label. Northern regions can be powerful only if they have real power, economically, politically and in their public services. I am not talking about devolution; I am talking about decentralisation. The Institute for Public Policy Research North, whose report we are discussing today, suggests ways of contributing to this power and releasing the energy of the north. I welcome it strongly.

I am delighted to see colleagues with such a wealth of experience and expertise taking part today. I look forward to their contributions. I am only sorry that time will be so limited. I note that some will talk with great expertise of cuts to local authorities, so I shall leave that to them. They will also discuss many other issues.

I shall explore part of the current story on the state of the north, then look at some possible ways forward. I shall look first at social mobility, a component of power and potential. When I was growing up in the north many years ago, social mobility was a term unheard of. You got on—hopefully, but not always—if you passed the 11-plus. In the working classes, where I came from, if you ended up not going to mills or the mines, then you had succeeded—at least partially. That situation is now much more complex. I hope to examine some of that complexity today. The situation is much more multidimensional, going beyond mills, mines and steel, which are of course mainly gone. A productive and ambitious northern economy needs to have its own potential for social mobility and high productivity. The potential is there; many dynamic things are happening, but times are a-changing.

The IPPR’s report begins by stating that its previous year’s annual report was full of confident projection of northern powerhouse potential, in relation to the economy, jobs growth, attractiveness for foreign investment and educational improvements, but there is a warning that the decision to leave the EU will affect the northern economy in terms of trade, access to skilled labour and EU funding. One worry is that devolution appears to have stalled and that the focus on rebalancing has been overtaken by an initiative to develop the industrial strategy.

We may all speculate on why so much discontent and anger were expressed in the northern regions during the European referendum and, of course, in the result. The areas most at risk from leaving the EU, but which could also benefit from new trade arrangements, voted to leave. Only Manchester, Liverpool, Stockport and Trafford voted to remain. People in the north were dismayed at neglect and disregard, at the perception that decisions were made in the south and that power and money resided in the south. The northern regions are more than three times as dependent on EU trade as London. The director of the IPPR has argued that Brexit negotiations should focus on the needs of the areas that voted strongly to leave. He has a point.

Brexit must not be bad for the north; we must be vigilant. In relation to productivity, the northern regions are growing faster than other regions. The weakening pound may be playing to northern manufacturing strengths, but disruption of trade with Europe is still to be feared.

A recent CBI report states that the most productive area of the UK is now almost three times more productive than the least and that wide geographic differences are the root of much inequality in the UK today. Parts of the north suffer disproportionately.

The State of the North report on social mobility states that many regions, and not just the north, have fallen behind London and the south. For example, more than half the adults in Wales, the north-east, Yorkshire and Humber, the West Midlands and Northern Ireland have less than £100 in savings. Young people who want to get on are moving away from many communities—again, not just in the north. Home ownership among the under-44s has fallen by 17% in the last decade; the gap between housing is accentuating the wealth divide. The average weekly pay of workers in Blackpool of £333 is half of that in Southwark—£639—and several, but not all, of the lowest hourly pay averages in the country are in the north.

I add to these figures concerns for transport, education and the issue of poverty and health. Wherever there is poverty and concerns for health, which occur frequently in the north as reports on equality have shown, a whole population may be damaged from before birth onwards. An OECD report last year pointed out that the UK has the worst performance of intergenerational earnings mobility among OECD countries. The Social Mobility Commission, chaired by Alan Milburn with the noble Baroness, Lady Shephard, as vice-chair, identified four fundamental barriers that are holding back a whole tranche of low and middle-income families in communities in England—again, not just in the north. These factors are: an unfair education system; a two-tier labour market; an imbalanced economy; and an unaffordable housing market. Our education system seems intractable, with more emphasis on passing exams rather than the soft skills, such as communication skills and teamwork, which are required by industry. Not enough emphasis is placed on the early years, although that is improving, and sport and the arts are being neglected. We need to look again at what we are doing to our children.

My noble friend Lady Corston chaired a committee last year which produced a challenging report, Overlooked and Left Behind. It pointed out the inequalities between academic and vocational routes to work for young people and the importance of advice in making transitions and choices. Speaking of young people, I am delighted to learn that the Children’s Commissioner for England is developing a new project to look at childhood in the north of England and the opportunities for children provided by devolution and regeneration. This project will seek to understand the regional differences in children’s experiences and how these impact on outcomes. This will surely be a project to follow. The report of the Commission for Housing in the North, published by the Northern Housing Consortium, points out that a response to housing in the north is local flexibility and the use of public investment, developing new partnerships and revitalising places.

I am highlighting just a few points; I know that other noble Lords will elaborate more. Let me now discuss the possibility for development. The CBI report on regional growth, which I mentioned earlier, identifies four main drivers of regional productivity: ensuring a strong school performance and results at GCSE and—recognising that school is not enough—work training and development; transport links that widen access to labour, also examined by Transport for the North; better management practices; and a higher proportion of firms that export and innovate.

These concerns link with the views of IPPR North. In 2015, it set out four tests for the northern powerhouse: to generate a better type of economic growth that combines rising productivity with more jobs and better wages for all; to liberate the potential of people through improvements to the development of skills, starting with the youngest, including pre-schoolers; to invest in future success, particularly in terms of innovation and building infrastructure for the future; and to rejuvenate local democracy by giving people a genuine involvement in the way that the north of England is run. These tests are still important—I have touched on some of them already—but times and contexts move on. In the 2016 report, IPPR North praises the progress being made in relation to transport, infrastructure, finance, trade and investment, and the schools strategy. But there is a caveat—clouds on the horizon. Wider events, with Brexit a large influence, mean that business confidence is threatened and the prospect of inclusive growth in the north looks distant.

The IPPR makes three recommendations. The first is the formation of a northern Brexit negotiating committee, to enable the north to be heard and to build trade relationships with regions and nations within and beyond the EU. This recognises that the Government’s industrial strategy is an opportunity to take a more proactive approach to structural challenges. The second recommendation calls on the Government to adopt a place-based approach to industrial strategy with the core principles of regional differentiation, co-ordinated investment and devolution. Local economic resilience needs to be fostered and developed. Thirdly, local enterprise partnerships should conduct resilience audits that set out the post-Brexit threats to their economies and develop strategic responses. Government should be asked to back this strategy as part of a new round of devolution deals with each local enterprise area.

As the report also states:

“The North has distinct economic assets and interests that present both opportunities and threats as the UK prepares to leave the European Union”.

It warns that the patchy development of combined authorities, metro mayors and devolution deals in the north affect the formulation of a coherent response to Brexit.

I have attempted to give a flavour of this exciting report and touch on some of the issues facing the north in relation to its economy and underlying structures, such as health, education, housing and transport. Much is positive; much shows forward thinking. The importance of local enterprise partnerships and the encouragement of local democracy are at the core of progress in the north. Will the Government heed the warning signs of the IPPR report and consider its recommendations? I beg to move.

[Baroness Vere of Norbiton (Con)]

My Lords, I remind the House that there is a five-minute time limit for Back-Bench speeches, so if the clock says five, I am afraid that you have gone over.

Child Sexual Abuse: Football Clubs

Baroness Vere of Norbiton Excerpts

Thursday 15th December 2016 Lords Chamber

[Baroness Vere of Norbiton (Con)]

My Lords, and so it goes on. Another day, another part of our society has to face up to the enemy within, whether it is now or many, many years ago. So far, we have had Churches, charities, hospitals, schools and others—all sectors that should have the highest level of care and safeguarding for young people—but they have been and sometimes are being found wanting.

The Question asked today is what the Government should be doing about it. It is without doubt that victims of these crimes have suffered enormously and have shown great courage in standing up to talk about what happened to them. I am sure that all of us in your Lordships’ House would commend them on their bravery and hope that, if others have suffered, they, too, decide that now is the time to speak up, because time is of the essence: for the accuser, but also for the accused.

The grown-up sons of a friend of mine had an experience recently. She was woken by a knock on the door very early one morning, allowed to make one phone call and then had to sit in her sitting room all day, guarded by the police, as her house was searched. All devices were removed, including hers, and her sons were taken away for questioning.

To cut a long story short, it was a hugely traumatic experience for all concerned, and it went on and on. The sons were asked to report back to the police station again and again. On one occasion, they turned up and were told: “Didn’t you get the letter? We don’t need you today”. The letter actually arrived the next day.

After well over a year, it was all finally over. One son was completely exonerated of any wrongdoing; the other was given a bit of a slap on the wrist for something he did many years previously which was not malicious, possibly not even illegal, but quite stupid. I am sure that all of us with teenage children know that they do stupid things.

I am not saying that the police are wrong in most of their actions—of course they are not; they must investigate fully—but the impact on that family was enormous, although there was no wrongdoing. The impact on the boys, in particular, was massive. One lost his job; the other was at university and his studies were severely disrupted. Whatever must be done—and I agree that we must do things—in this case and in all others it must be done quickly, effectively and with minimal distress to all those involved, both accuser and accused, because sometimes they have not done something wrong.

What does this mean for the recent revelations surrounding football? First, I sincerely hope that all affected individuals come forward and speak up so that the full scale of the issue can be understood. Then I hope that all those charged with investigating the actions of the few are empowered and resourced such that they complete their investigations as quickly as possible; and then that action against those who have abused is swiftly taken. It would be a terrible shame to blight the hard work of the vast majority of those in football, who love the game and are as appalled as we are to hear about these events. We must investigate, take action and allow everyone, in football and beyond, to try to move on.