Living Wage

Debate between Viscount Younger of Leckie and Lord Flight

Monday 9th June 2014 Lords Chamber

[Viscount Younger of Leckie]

The noble Lord makes some good points about enforcement. We are taking strong action on this front. He will be aware that 25 other firms have been named and shamed in the past few days. The case of the Premier League football club that the noble Lord raises was dealt with under the old naming policy, pre-October 2013, and did not meet the financial criteria of £500 per worker so could not be considered for naming.

[Lord Flight (Con)]

Does the Minister accept that there is an element of chicken and egg in the comments of the noble Lord, Lord Haskel, and that it is actually since the Labour Government brought in tax credits that productivity has been flat, wages have not risen in real terms and the situation has been much the same as in the early nineteenth century when wages were subsidised?

[Viscount Younger of Leckie]

The noble Lord makes a good point. It is fair to say that Labour’s plan for encouraging tax breaks to encourage employers to pay the living wage applies for 12 months only and will cover less than one-third of the increased cost to the employer. Increasing the cost of employment could encourage businesses to employ fewer people. Labour’s estimates of the cost of this policy ignore these issues, and the party has considered only potential benefits to the Exchequer.

Economy: Manufacturing

Debate between Viscount Younger of Leckie and Lord Flight

Monday 10th February 2014 Lords Chamber

[Viscount Younger of Leckie]

I will need to write to the noble Baroness about that specific example, but I hope she will be greatly encouraged by the huge amount of work going into progressing the UTCs. There are 50 of them, creating 30,000 opportunities for young people to train as engineers and scientists for the future. These are the skills that we need to build up.

[Lord Flight (Con)]

My Lords, I wish to ask the Minister about the definition of manufacturing versus services. A lot of the new technology sector that I am aware of does not really fit into either category, and I suspect that the overall assessment of manufacturing is underassessed as a result of technical developments.

[Viscount Younger of Leckie]

My noble friend makes a very good point. Indeed, manufacturing has changed enormously. Although I do not have a precise definition for him, it is true that manufacturing includes myriad small businesses that are working very hard not just within the UK but in helping our export drive.

Growth and Infrastructure Bill

Debate between Viscount Younger of Leckie and Lord Flight

Wednesday 20th March 2013 Lords Chamber

[Viscount Younger of Leckie]

That takes me back to the question raised by my noble friend Lady Brinton. If there are too many employee shareholders to make this work, there may indeed be no room for another employee shareholder. I say again: the opportunity is voluntary and the terms are to be agreed between the employer and the employee. That is all that needs to be said. It is exactly why we are not being too prescriptive with this system. We are providing an opportunity for employers to take up this scheme and for employees to share in its risks and rewards.

[Lord Flight]

My noble friend Lord Forsyth makes a fair point. If tax is to apply, it is difficult to determine how the value of the shares in question is to be assessed, given that they may have certain characteristics. However, I will turn that point on its head, in that it is an argument for there being no tax bill at all because the problem goes away if there is none. My basic point is that common sense states that no one will be much interested in a deal whereby you give up your employment rights for just £2,500 of equity. There should be potential for much greater gain. Something like seven out of 10 smaller businesses in this country tend to fail as a result of taxation being too high and the public sector too large. The situation is not like that in Hong Kong, which is much more successful.

The equity element would be of high risk for people in SMEs. I repeat my point: it is not a question of the Government losing revenue; they will not get any revenue under the clause as it stands because not many people will take advantage of it. Therefore, the Government will not lose any revenue. If they believe in the principle, which I believe in very strongly, there has to be an attractive risk/reward ratio. To my mind, one way or the other, that requires the value of shares on which there is no tax charge to be more than £2,500, although my figures are essentially for illustration.

Growth and Infrastructure Bill

Debate between Viscount Younger of Leckie and Lord Flight

Wednesday 6th February 2013 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)]

Noble Lords will not be surprised to know that I was expecting a somewhat lively debate on this general issue of shares for rights. I very much appreciate noble Lords’ contributions. Before I turn to the amendments in the group—Amendments 81D, 82A, 82B, 91 and 92—I should take this opportunity to inform the House about the clause. I will have the chance to expand on this during a stand-part debate, but the House might like to understand why the Government are creating the new employment status and what it is aimed to achieve.

The Government are creating a new form of employment contract that companies limited by shares can use. This new status will be known as “employee shareholder”. The employee shareholder will be granted shares in the employing company or the parent company but will not have all the rights of an individual with employee status. The Government are taking this action to offer companies and people more choice, and are giving choice to companies on how they structure their workforce to ensure maximum growth and flexibility, more choice for people in the type of jobs that are on offer to them and new opportunities to benefit from growth and meet their long-term aspirations.

This Government, from the outset, have committed to reforming employment laws, and are doing so through the employment law review. Establishing the employee shareholder status is different. With this change, the Government are creating a new type of employment relationship. It is an employment relationship where both the company and person share the risk and rewards for business more than any other employment type.

I now want to address the amendments tabled by my noble friend Lady Brinton and the noble Lords, Lord Adonis and Lord Pannick. This clause is not about making a new employment status compulsory for all. It is about adding to the employment statuses that already exist. It sits alongside existing employment statuses such as employee and worker.

Employment law does not stipulate that individuals should have legal or financial advice before accepting a job with the employment status of either employee or worker, or taking up share ownership possibilities. It would be anomalous to impose these requirements for the new employee shareholder status. Neither do we want to stipulate that employers must pay for legal advice. Noble Lords will appreciate that legal expenses can be high, which would be a burden both in administrative and cost terms, in particular for the type of fast-growing company to which this is most likely to appeal.

There is nothing in the clause that prevents individuals from seeking independent advice. This is about creating a new voluntary employment status and not about creating additional burdens for employers.

As for employment contracts, it is important to leave these to employers and individuals to negotiate, discuss, and agree to, although employees are entitled to receive a written statement of employment particulars within two months of the start of their employment. Government are committed to reducing burdens arising from regulation and therefore wish to keep administration requirements to a minimum.

The status, as we have already said, will be most attractive to fast-growing businesses, which will spend time looking for and investing in the right people to help their business grow, and will be willing to give fully paid up shares to the right candidate. These employers will have to invest in employee shareholders by giving them shares, which is a cost to them. It is likely that they are exactly the type of employers who would then struggle to find the additional cost and time to fulfil the amendments my noble friends and the noble Lords are suggesting.

[Lord Flight]

Just before my noble friend passes over this matter, I would like to raise one issue that is not clear to me. When the grant of shares is given, is the value of them treated as taxable income? If so, I certainly think that it should not be part of the deal as something that is tax attractive.

[Viscount Younger of Leckie]

I thank my noble friend for that question. The shares are treated as taxable income, although they are shares, so there would be tax at whatever level payable on the shares received.

I should now like to answer some questions that have arisen. The noble Lord, Lord Pannick, stated that there was no demand for this new status. I can understand his concern from other comments made this afternoon. This new employment status will not be appropriate for all companies or be taken up across the board. It simply adds to the options and flexibility available to companies and individuals in determining their employment relationships.

My noble friend Lord Flight has eloquently mentioned this particular issue in his speech. The new status will probably appeal mainly to fast-growing and small start-up companies and individuals as this is the level where employment rights are seen to impact the most.

I would like to address directly the points raised by my noble friend Lady Brinton to say clearly that this particular employment shareholder status will not suit the examples that she cited in or near the Cambridge area. My noble friend Lord Strasburger also cited some example and I suspect it would not suit—

--- Later in debate ---

[Lord Flight]

My Lords, the amendment was intended to be part of the debate on Clause 27. Given that the employee shareholder status is new and that there are still differences of view about its structure, it is obvious that there will be a need for guidance and, in particular, a need for a model employee shareholder contract for early-stage companies. I beg to move.

[Viscount Younger of Leckie]

My Lords, in Amendment 95 my noble friend Lord Flight proposes a new clause relating to the publication of guidance on the new employment status. He makes a good point on the need for guidance. The Government agree that guidance should be available to help companies and employee shareholders fully understand all the implications of offering or accepting these contracts. It has always been our intention to publish guidance on the new status. The issue of guidance is an important one. Good, clear and accessible guidance will be vital to both companies and employee shareholders. We want to ensure that people enter into these contracts with their eyes open.

I will outline what the Government propose to publish by way of guidance and explain what that guidance will cover. The .gov.uk website is the new centralised place for publication of government services and information. The website already has a number of pages that provide an overview of the different types of employment status—such as worker and employee—and list the rights that are attached to them. We will provide an equivalent page on the new employee shareholder status.

Within these overview pages there are links to more detailed information on each individual employment right, and these pages will also be updated to take account of the new employment status. People who look for information on employee shareholder contracts will be very clear which rights they are entitled to and which rights do not apply to the status. This will help them to decide if an employee shareholder position is suitable for them.

Changes to these pages are being revised at the moment and we will be in a position to share draft copies with you before this clause is debated on Report. The Government will also update guidance on the tax treatment of shares and capital gains tax to make it clear to employee shareholders what their obligations are and to set out how the associated capital gains tax exemption and other relevant tax treatments will work.

Any contract of employment is an agreement between an employer and employee and is the basis of the employment relationship. We believe that contracts work best when people and companies are free to decide the terms that best suit their business needs, and to attract the right people to their companies. We will provide guidance for companies to enable them to understand the new status. Companies would do well to take note of the comments of my noble friend Lord Flight on the importance of drawing up good employment contracts that apply equally to the statuses of employees and workers.

While I understand my noble friend’s intention behind this amendment, we believe it is not necessary to legislate on this matter. To state this in the Bill would just introduce more legislation, which in turn would create more red tape for businesses. As the Government have already committed to publish guidance, I hope that with these assurances my noble friend will be willing to withdraw his amendment.

[Viscount Younger of Leckie]

My noble friend makes a very fair point. Of course I will copy in all noble Lords who should or would like to be copied in.

[Lord Flight]

I thank the Minister for his response. I am pleased to find that the matter is in hand. I therefore beg leave to withdraw the amendment.