Growth and Infrastructure Bill

Lord King of Bridgwater Excerpts

Monday 22nd April 2013 Lords Chamber

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.

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 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 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.

--- Later in debate ---

[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.