Lord Bhikhu Parekh is Patron of The Gandhi Foundation and a Labour Peer. The following speech was delivered in the House of Lords on 10th December 2008

My Lords, I shall begin with an apology. Although I have a very bad throat, I put my name down to speak in this debate because it raises some extremely important issues on which I want to share a few thoughts. The gracious Speech commits the Government to creating a single Equality Act. In so doing, it redeems the Government’s pledge given in the 2005 election manifesto. The proposed Equality Act will reduce nine major pieces of legislation and around 100 statutory instruments to a single Act and will harmonise different strands of equality. I welcome the Bill and many of its provisions.

As the Government rightly note, equality is vital for the development of individual talents and for creating a cohesive society. It is precisely because I welcome the Bill that I shall concentrate on four or five areas where it needs to be strengthened. First, the Government spend between £160 billion and £175 billion on procuring goods and services from the private sector. This gives them powerful leverage, which should be used effectively to ensure that the private sector fulfils their equality objectives. In the 1980s and 1990s, the American Government did that with considerable success in the name of contract compliance. The Bill refers to the Government’s power, but it is not entirely clear what pressure they intend to exert on the private sector, how they will enforce and monitor such powers, and what incentives and penalties they will rely on to make sure that the private sector realises their objectives.

Secondly, the Government are rightly worried about ensuring equal pay for women. The difference in earnings between men and women is 17.1 per cent in the public sector and 21.7 per cent in the private sector. For part-time workers, the figure can be as high as 36.6 per cent. An average full-time weekly earning for men is £521, as opposed to £412 for women. Not surprisingly, the World Economic Forum placed Britain 81st in the world in terms of equal pay. Something needs to be done.

While 43 per cent of public sector organisations have completed or are planning to conduct an equal pay review, only 23 per cent of private sector organisations are doing that. As has been pointed out, at this rate, we will have to wait for 150 years to ensure equal pay for women. How will we tackle this? The Government rightly talk about a mandatory pay audit. Obviously, there is something to be said for that, but it is a strong, blunt instrument. One way would be to make the organisation concerned transparent so that these things can be easily understood. Another would be to make it easier to pursue and resolve the complaints that individuals might make within an organisation or in a court.

The same problem occurs in relation to the ethnic minorities where the disparity is even greater. Equally qualified men receive highly unequal pay, which is sometimes known as the “ethnic penalty”. I am a little surprised that the Bill is silent on that and concentrates almost entirely on gender equality.

Thirdly, the Bill also is silent on the regular audit of government policies with regard to their impact on equality. The Government have rightly agreed on a £700 billion package to bail out banks and the financial sector. But they have offered only £1 billion to help out small- and medium-sized businesses, which is to be delivered through the banks. Let us look at this from the standpoint of ethnic minorities. Most ethnic minorities work not in banks and the financial sector, but in small- and medium-sized businesses, and they get a very tiny slice of the national cake.

More importantly, banks have not been even-handed in their lending practices or risk assessment. The Runnymede Trust, of which I am a patron, recently published a report called, Financial Inclusion and Ethnicity. It showed conclusively that the banks have been deeply biased in their lending practices. If that is the case‚ I hope that the Government will commission a survey on this, what provisions have the Government made to ensure that support for small- and medium-sized businesses is channelled through banks, but is carefully monitored?

Unless carefully planned, government policies‚ the example that I have given confirms this‚ are likely to marginalise ethnic minorities, and recovery from recession, as and when it occurs, which I hope will be soon, will not be inclusive and fair. It is striking and somewhat disappointing that in the debate the other day on business, no mention was made of how the Government policies of bailing out banks or small businesses are likely to impact on ethnic minorities. Even my noble friend Lord Mandelson, whom I admire, made absolutely no reference in opening the debate to how government policies are going to affect ethnic minorities and whether they might not turn out to be deeply discriminatory‚ unintentionally, of course‚ in their impact on ethnic minorities.

My third point concerns the policy of positive action. The Government are rightly committed to a policy of positive action, which broadly states that if two candidates are equally qualified, a member of an under-represented and disadvantaged group might be preferred. We see this sort of positive action in many areas, and it is permitted through case law in the European Court of Justice. That is fine, and I welcome the policy, although it seems to have been opposed by the CBI and many other institutions. I want to go a step further. To say that preference will be given to under-represented and disadvantaged groups when the candidates are equal raises two questions. First, it is never easy to decide whether two candidates are equally qualified. When someone is to be appointed to the House of Lords and one candidate is a professor and the other a businessman, both equally qualified in their fields, how do we decide? Secondly, and more importantly given past experience, there is no guarantee that bias and discrimination would play no role in the judgment of candidates. It is because we realise these difficulties that we have talked in terms of targets, which offer a broad indication of what an organisation should look like if it is fairly and justly run. Targets are not quotas, which everyone knows are unacceptable.

When we note that women MPs make up only one-fifth of the membership of House of Commons and say that something needs to be done, we are neither advocating a quota nor saying that women should be selected only when they are equal in all other respects. What we are saying is that given women’s representation in the country at large, there is no good reason, unless we assume that they are less intelligent, why women should not be more or less equally represented. Starting from that kind of self-evident premise, how do we explain the failure of an organisation to come up to these norms? Such thinking is even more necessary in relation to ethnic minorities, the disabled and other under-represented and disadvantaged groups. I would suggest that the fact that a group is under-represented and disadvantaged does not come into play only after other factors are taken into account. Instead it should be one of the important factors to be taken into consideration in the first instance when deciding who is best qualified for a particular job.

Finally, I turn to the specific duty that the Government intend to place on public sector inspectorates to monitor how well public bodies comply with their equality obligations. I like this proposal, but in order for it to be effective, there will have to be greater transparency in the organisations concerned, both private and public, and greater powers for the inspectorates to name and shame organisations; and perhaps even the power to impose penalties. I see no reference to such measures in the Bill. It becomes particularly important in relation to the private sector, which is beyond the ambit of official inspectorates. What is going to be done in relation to that sector? I draw attention to the simple fact that 11 per cent of the directorships in FTSE 100 companies are held by women, fewer than 2 per cent by ethnic minorities and even less by other disadvantaged groups. What do the Government intend to do about that?

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