127A: After Clause 54, insert the following new Clause—
“Review of the extent and impact of pay inequality(1) The Secretary of State must conduct a review of the extent and impact of pay inequality, with particular regard to the highest level of pay in comparison with the median and lowest pay in an enterprise, in large enterprises.(2) The review must be carried out no later than 12 months after the day on which this Act is passed.(3) The Secretary of State must publish the findings of the review within three months of its completion.(4) Large enterprises are those exceeding the medium-sized companies threshold under the Companies Act 2006.”Member's explanatory statement
This new clause requires the Secretary of State to conduct and publish a review of the impact of pay inequality in large enterprises.
My Lords, Amendment 127A in my name is a milder attempt to deal with the pressing issue of pay inequality and soaring executive pay in our society than the amendment I tabled in Committee, which was to provide for a 10:1 maximum pay ratio for enterprises. I hope this one has a slightly less inflationary impact on the blood pressure of the noble Lord, Lord Hunt of Wirral, while dealing with the excessive boardroom remuneration referred to by the noble Lord, Lord Monks, two groups ago.
The amendment simply seeks to put in the Bill a review of the impact of pay inequality in large enterprises, as defined by the Companies Act 2006—those with net turnover of more than £54 million, assets of £27 million and more than 250 employees. I hope that the Government will seriously consider this approach. It is not my intention to put this to a vote, but I want to be helpful to the Government here and offer them some constructive ways forward.
The noble Lord, Lord Katz, in part made the argument for this amendment for me in Committee when he said that:
“It is right that companies should be sensitive to wider workforce pay when setting pay for those in the boardroom and other senior leadership positions”.—[Official Report, 24/6/25; col. 201.]
However, suggesting that companies be sensitive is not really going to do it. That seems to be the Government’s position. I noted that the Water Minister, Emma Hardy, on LBC this morning, urged water company bosses to “read the room” and refuse huge wage hikes. Well, the room has been sending a very clear message about water company bosses’ pay for a long time and the voluntary approach has simply not worked.
We are talking here about the right of lower-paid workers not to be disrespected—insulted—by the soaring pay in the boardroom while they struggle to meet their basic needs, pay their bills and put food on the table. This is action that clearly needs to be taken, not just words of gentle encouragement.
My Lords, I thank the noble Baroness, Lady Bennett of Manor Castle, for tabling Amendment 127A. Although it rightly raises the important issue of pay inequality, it effectively duplicates a review process that we are already undertaking.
It is undeniable that average salaries have stagnated. In fact, they have barely increased from where they were 15 years ago. Had wages continued to grow at the rate seen prior to the 2008 financial crisis, the average worker would now be over 40% better off. This is not just about stagnant wages; it is about persistent and deep-rooted inequalities.
The UK’s income inequality remains above both the OECD and G7 averages. In the financial year 2022-23, the richest 20% of the population received 44% of the UK’s gross income, while the poorest 20% received just 7%. The OECD has noted that higher inequality can lead to underinvestment in human capital and slower adoption of new technologies. It estimates that rising inequality between 1990 and 2010 resulted in UK output being nearly nine percentage points lower than it might otherwise have been.
As I said on day 2 on Report, in one of the world’s wealthiest nations, workers are still turning to food banks. Many cannot afford rent, let alone a mortgage. Morale is at rock bottom and motivation is vanishing. The noble Baroness is right: executive pay keeps climbing. In 2023 the average FTSE 100 CEO earned 118 times more than the median UK worker, up from 50 times in the late 1990s. This is not sustainable or fair.
The UK exhibits greater regional disparities in productivity, pay, educational attainment and health than many other developed nations. This Bill, by benefiting lower-paid employees most, will help reduce these disparities, not only in terms of income but in the quality of work experienced. Supporting this, analysis published in 2019 by the World Bank found that employment protections can play a significant role in reducing income inequality.
My Lords, I thank the Minister for his answer, although I have to express disappointment that none of the other Front Benches wanted to engage with the issue of high pay. The Minister very much acknowledged the issues around low pay and talked about robust monitoring and evaluation of high pay, but he did not speak about any action on it nor even about any plans for action on it. We have a real problem with the inequality that has seen those executives’ salaries—those fat cat salaries—rise and rise. As I said in my introductory remarks, there is an opportunity cost where those resources are going to that, as well as, of course, the sense in society that there is a deep unfairness and the Government are not doing anything about it.
I remain disappointed. This is certainly an issue that I and the Green Party will continue to work on but, in the meantime, I beg leave to withdraw the amendment.
Amendment 127A withdrawn.
Clause 55: Right to statement of trade union rights
128: Clause 55, page 75, line 23, at end insert—
“(8) The provisions inserted by this section do not apply to small businesses.(9) For the purposes of subsection (8), a “small business” means an undertaking which employs fewer than 50 employees.”
My Lords, in moving this amendment, I will also speak to Amendments 129, 131 to 134 and 145 in my name and that of my noble friend Lord Sharpe of Epsom. What we are talking about here is the extent to which the Government’s sweeping changes to trade union access rights, including the unprecedented extension of digital access, should apply to small businesses. These changes were introduced without any proper explanation on Report and they have generated serious concern, particularly for our small and medium-sized enterprises, which may suddenly find themselves subject to obligations they neither anticipated nor are equipped to manage.
These amendments have been directly endorsed by the Federation of Small Businesses, the principal organisation representing the voice of small employers right across the country. I quote from it directly:
“New growth and jobs in local communities rests squarely on our SMEs, which make up over 99 per cent of all UK businesses and employ around 16 million people—disproportionately recruiting those furthest from work.
The Federation of Small Businesses (FSB) supports this amendment, which recognises the distinct nature and limited resources that small employers face when it comes to managing industrial relations in what in many cases are more like family units or teams, than big corporates.
They simply do not have the HR infrastructure or legal teams that big firms rely on to navigate complex union access procedures and negotiations. This amendment provides a necessary and vital safeguard by ensuring that SMEs are not automatically subject to trade union access requests or changes to recognition thresholds.
Our recent research found that 92% of small business employers are deeply concerned about the measures proposed in the Employment Rights Bill, with 72% specifically worried about the increased cost of compliance, such as the need for specialist HR or legal support. These figures further demonstrate the importance of maintaining proportionate, practical and measured safeguards, such as those contained within this amendment.
My Lords, I support all the amendments in this group but will speak specifically to Amendments 129, 131 and 145 tabled by the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, to which I have put my name.
Increasing the right of trade union access, as well as lowering the membership thresholds and the required percentages for action, is, as we know, applying right across the board, whatever the size of the business or organisation. It is Part 4 of the Bill, as the noble Lord, Lord Hunt, just highlighted, that is causing considerable alarm and nervousness among SMEs, particularly small, micro and family business owners. I know this through multiple meetings with business owners and the steady flow of emails into my inbox.
At this point I remind the House of my interests as a chair of, adviser to and investor in a range of small start-ups and scale-ups. One of the key issues that keeps being raised by entrepreneurs and business owners is workforce culture, performance and collaboration within teams, which are so vital to achieving productive, profitable and ultimately sustainable businesses.
These employers are not simply against any sort of unionisation of their workforce. In many cases they can see the merits, but they are very concerned about the enhanced provisions of access in the Bill and the potential impact on owner/employee relations, teamwork and, indeed, the increased time that will need to be devoted to changing induction paperwork, negotiating with staff and their unions, facilitating meetings and possibly having to work with the Central Arbitration Committee and the fair work agency, which will have the right of entry to their businesses and, indeed, to their records.
In an era when we as a nation desperately need to see real economic growth, especially per capita growth and productivity advances, this part of the Bill threatens to dampen those prospects and distract owners and management from this core mission. Among small businesses, there is also the danger of creating divisions unnecessarily between owner and workforce and, indeed, between members of the workforce itself. I know this is not the Government’s intention, but we run the risk of damaging these unique cultures that we see in start-ups and family businesses.
My Lords, I will speak to Amendment 130 in my name. It is purely an amendment to rectify a small perceived mistake in the legislation, whereby a trade union can, in theory, put in a demand to meet its members in a company immediately, without any delay or warning. This means that a company’s management must always be in fear of a sudden disruption to the company’s ongoing work.
I am sure that the Government did not intend to torment companies with this possibility. I have put forward this amendment with a view to giving the Government an opportunity to agree that some kind of advance notice—I am suggesting a delay between request and meeting of at least two days—is a good idea, and that the length of that advance notice should be put in the Bill.
We all agree that business is the engine of economic growth and the ultimate creator of jobs. Therefore, we all in this House must be agreed that helping business accomplish its ends is important. The Government want the economy and jobs to grow—they have told us so repeatedly. They do not want companies worrying unnecessarily about sudden disruptive swoops from the union. We can see at once that there are many circumstances where a request to meet immediately just would not work. Imagine, for example, the air traffic controllers having to suddenly down tools. Imagine a complex, just-in-time process of many interlocking parts suddenly being interrupted, with an appalling domino cascade of interruptions and failures as a result. Imagine a complicated safety audit being disrupted.
I am sure that the Government have no intention of this and I imagine that the Minister will tell us that it is not at all the intention. However, while it might not be the intention, the opportunity is there in the Bill for the trade unions to act in this way. Therefore, why not, in the Bill, prevent that opportunity?
Noble Lords
Oh!
20 of 71 shown
As I said in Committee, the security and catering company Mitie, with a 575:1 ratio between its top-paid employee and the median employee, and a large number of low-paid workers, tops the High Pay Centre’s FTSE 350 companies hall of shame. I note that this month, the Labour Party postponed a London drinks reception for north-west MPs sponsored by Mitie after a backlash over the company’s employment practices. Unison had planned to picket the event. You have to question why it was ever planned in the first place.
A review such as the one proposed in the amendment could be a start towards the Labour Government generating policies such as those recommended by the High Pay Centre in its useful list of proposals—I recommend it to Ministers as a crib sheet, since the current Government were elected with so few policies of their own in place—such as all-employee profit-sharing or share ownership schemes. As the centre notes:
“One of the reasons why … the pay ratios between workers and CEOs are so wide is that CEOs receive large share-based payments in addition to their regular salary while workers do not … In France all companies are required to share an element of profits exceeding a set amount calculated using factors including taxable profits, net equity, wages and added value with their workforce”.
This has actually reduced inequality.
Another timely proposal from the centre, which again a review might throw up, is a cap on CEO-to-worker pay gaps for public service providers, such as water companies—here we have another way forward—or social care providers. The claim made by the noble Lord, Lord Katz, in Committee, that high pay means
“companies can compete for the best business talent in the UK and globally”,—[Official Report, 24/6/25; col. 202.]
certainly does not stack up in the water sector, if one looks at its outcomes. Fat cat pay has delivered only underinvestment, pollution and ill health for those unfortunate enough to have to rely on the services of the privatised companies.
Finally, I note that, responding to the call for even higher executive pay from the UK capital markets task force—drawn from the City of London and big business—a letter written by 20 leading academics specialising in executive pay, corporate governance and economic inequality made a number of points, including that there is a very “questionable” link between
“higher executive pay and better business performance”,
that any claim that there is a
“shortage of capable candidates for executive roles should … prompt scrutiny of companies’ leadership training and development processes”,
and that the “opportunity costs” of high top pay have impacts
“in terms of … pay for low and middle income workers or investment in the business”.
It is interesting that polling by the High Pay Centre suggests that the overwhelming majority of the public think that CEOs should not be paid more than 20 times more than their typical employee. If the Government want to consider the politics of this, I point to the conclusions in the report, The Spirit Level at 15, by Professors Kate Pickett and Richard Wilkinson, which articulates many of the ways in which inequality strengthens far-right politics. Executive pay is only part of that story, but it is a very visible part. This amendment offers the Government a way forward to start to tackle that political problem, as well as the economic and social issues. I beg to move.
As I have previously outlined, we already have robust monitoring and evaluation mechanisms in place. By reinforcing the framework that supports our workforce, we are making work more secure and predictable. We are also putting more money into the pockets of working people by making wages fairer. I therefore respectfully ask the noble Baroness, Lady Bennett of Manor Castle, to withdraw Amendment 127A.
We hope that Conservatives and Liberal Democrats will back the amendment to delay these measures, and that the Labour Government will agree to it, to guarantee proper consultation, and assessment of the practical impacts on SMEs, and that Parliament considers these before Ministers turn on these provisions”.
I beg to move.
In short, whatever the Government’s rather confusing claims on consultation, the SME community—which, as we have heard, accounts for nearly 17 million jobs and £2.8 trillion turnover per annum—clearly does not feel that it is being heard, let alone consulted. Amendments 129 and 131, in particular, seek to address this, in what I believe is a considered and structured way.
First, we need to see structured and representative consultations across micro, small and medium-sized businesses, across the key sectors, and involving start-ups, scale-ups and family businesses, from those employing two to three staff to those employing 20, 50 or 150 staff. These are very different enterprises, not just in size but in stages of development.
Secondly, we need to see coherent impact assessments for each of these groups, not the one-size-fits-all approach that dominates so much of this Bill, and not just by size but by sector. From agriculture to technology and telecoms, they will be impacted in very different ways. As we have heard, SMEs will need time and fair notice—certainly not before April 2028—to be ready to deal with the potential consequences of these clauses.
None of this is unreasonable in my view. These amendments would help the Government to avoid damaging the SME ecosphere at a time when we need to proceed with care and caution, and especially if we want SMEs to be the engine of real economic growth.
We all agree that untrammelled regulation is a “boot on the neck” of business—we were assured that that was the case just last week by the Chancellor of the Exchequer herself—yet here in Clause 50 we have yet another regulator, not the first one that we have discussed that has been created for the Bill, with fining powers. Last week, in the same Bill, it was the FWA; now, we have the Orwellian-sounding central arbitration committee, again with fining powers.