Growth and Infrastructure Bill

Andy Sawford Excerpts

Tuesday 16th April 2013 Commons Chamber

[Mr Umunna]

With the greatest respect to the hon. Gentleman, my understanding is that the survey was conducted among the very businesses to which he refers. As far as I am aware, the Government have not claimed that it is specifically for small businesses. I am happy to be disabused if I have got that wrong.

Thirdly, the proposal could do immense damage to workplace relations and to the standing of business more generally. I say that from a common sense point of view and as an employment lawyer. What on earth are employees to think if suddenly, out of nowhere, their employer says, “Will you give up all your fundamental rights in this workplace if I give you some shares?” What signal will that send to the employee? [Interruption.] The hon. Member for Skipton and Ripon (Julian Smith) says from a sedentary position that it is voluntary, but what does that say about one’s relationship with an employer if they are talking about taking away fundamental rights at work? As Justin King, CEO of Sainsbury’s and until recently a member of the Prime Minister’s business advisory group, said, what will the population at large think of businesses that want to trade employment rights for money?

Fourthly, and this applies more generally to the Government’s moves to destroy the unfair dismissal regime, removing people’s rights to claim unfair dismissal, or a redundancy payment for which compensation is capped will simply increase the likelihood of employers facing spurious discrimination claims brought against them, for which compensation is unlimited. That was a point made by Baroness Brinton in the other place.

If an employee is to be offered this special type of employment status, it is important that they should be able to access proper advice on it, particularly in this climate when jobs are few and far between. That point was made by the noble and learned Lord Pannick, who proposed the amendment. The Government have refused to accept that statutory rights should be lost only if the agreement is in writing and the person concerned has received proper independent legal advice on its consequences. That is how it applies in relation to compromise agreements.

Then there is the issue of the shares themselves and tax. How on earth are these to be valued, particularly given—if the hon. Member for Enfield North (Nick de Bois) is right that the measure is aimed at small companies—that many are unquoted. How will the value of shares be determined without incurring exorbitant fees that would render the whole exercise worthless? According to the Treasury, it will cost the Exchequer £l billion by the end of the forecast period, but the true cost may well be more because, as the Treasury’s December 2012 policy costing document says, it is hard to predict how quickly the increased scope for tax planning will be exploited. That point was picked up by Paul Johnson, the director of the Institute for Fiscal Studies, who said that

“just as government ministers are falling over themselves to condemn”

tax avoidance

“that same government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry.”

[Andy Sawford (Corby) (Lab/Co-op)]

My hon. Friend is absolutely right to raise the issue of tax avoidance. Is there not also an implication for lower paid workers? The Minister has just told us that only the first £2,000 of shares will be exempt from PAYE and national insurance. Does that not mean that workers with, say, £4,000-worth of shares will be hit with a tax bill?

[Mr Umunna]

That is absolutely right.

My final and principal objection to the proposal is this: last November, I put it to the Business Secretary in this House that an employer in his Twickenham constituency would, under these arrangements, be able to make acceptance of job offers conditional on people agreeing to accept employee owner status. He denied that that was the case, yet patently the arrangements allow for it. The risk in the current jobs market of people being pressurised, or feeling under pressure, to take jobs with this type of status will be increased.

I am pleased about the Minister’s concession today. I raised the point with him on Report, but did not get the kind of assurance or concession that he just gave, and it is good that he gave it. Lord Forsyth said he was astonished that the coalition was even thinking of bringing forward a measure under which people could have their right to jobseeker’s allowance withdrawn if they did not accept a job on this basis. Of course, we will need to study the guidance. We have not seen it yet, and the first we heard of the concession was from the Minister just now. Notwithstanding the concession, however, and for all the reasons I have just given, we continue to support Lords amendment 25.

--- Later in debate ---

[Nick de Bois]

I hope that the hon. Gentleman will understand, as I am sure he does, that the best chance of success for a micro niche business—the people who will benefit from this measure and become tomorrow’s medium businesses—is to be in the most flexible market possible. The supply side has to be flexible, so that employers can afford to take the risk.

These very modest removals being offered to individuals—they will not be compelled to take them—will be attractive to entrepreneurial, non-risk-averse employees as well as to small, flexible business leaders wanting to start a business.

[Andy Sawford]

The hon. Gentleman makes the point—it is a legitimate point, but I happen to disagree with it—that these regulations are over-burdensome. One person’s regulation is another person’s basic employment protection. The critical issue, however, is surely the link. His argument might well be worth hearing in this place, but why link the two? That is the critical issue that my constituents do not understand.

[Nick de Bois]

The biggest step someone takes when they start a small business is employing someone. They cease to be a sole trader working in their own environment; their own boss without responsibility for anyone else and having to meet only their own needs and those of their family. They do not want to take that step chained by too many onerous responsibilities too early on. They seek therefore to strike a deal with their investor or partner, and in return for that flexibility they do not ask for a single penny in cash to invest in the business. That is a good deal. I would have taken it, had it been on offer to me and had I faced these regulations.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

I want to make four simple, brief points. The first is about share ownership. I tabled amendments when the Bill was debated in this House to try to extend share ownership without connecting that with the loss of rights. It is noticeable that the Government opposed those amendments. As people look to reconstruct the economy and learn the lessons from what has happened in this economic crisis, there is a genuine willingness to look at greater involvement by the work force in the management of companies. Part of that is about extending share ownership to workers. That is a development that we have welcomed in both Houses. The problem is that linking the two things in this way will not act as an incentive for companies to recruit the best; in fact, it will act as a deterrent. If someone faces the choice of going to a company that offers them share ownership without the loss of rights, they will go to that company. If they have the opportunity of going to a company where they will have to sell some of their rights, that will obviously act as a deterrent.

[Andy Sawford]

I agree with my hon. Friend’s point about workers in that situation, but we should also challenge the account that is being given about how attractive this measure will be to small businesses. I have run a small business. The idea that I would have to work out the tax and other implications of this measure with my work force when I had far more important things to do—building a good, strong work force and running a business—does not stack up to me.

[John McDonnell]

I was going to make that point. There is an element of complexity in this scheme which will lead to small businesses coming to us in about six months’ time and saying that it is part of the overburdening of regulation.