Growth and Infrastructure Bill

Baroness Turner of Camden Excerpts

Wednesday 24th April 2013 Lords Chamber

[Lord Forsyth of Drumlean]

My Lords, I pay tribute to my noble friend Lord Younger and to the Chancellor of the Exchequer. We have had some pretty robust debates around this. We started with the proposition that it was wrong that someone who was sent from a jobcentre to take a job but who declined to accept an employee shareholder contract could be found to be intentionally not taking work and therefore be subject to sanctions on their benefits. That was dealt with. On the fundamental point, I do not wish to repeat the arguments which the noble Lord, Lord Pannick, has made, although I will observe that it is a relief to me to discover that there is something that he does not know about and which I do: the drag-along rights. It strikes me that drag-along rights are quite a good way of describing the process of this Bill in respect of the Government.

However, we have eventually got there, and the most important thing, as the speech of the noble Lord, Lord Pannick, indicated, is that this can be an extremely complex and difficult area and that we are making a fundamental change of principle here in that people can negotiate away certain employment rights. The need for independent advice is therefore crucial, and I am delighted by the amendment which my noble friend has brought before us. I pay tribute to the long-suffering officials in the Treasury and BIS for the way in which they have produced an amendment that covers the ground completely. My first instinct when I heard that the Chancellor had decided to accept our arguments was to rush to the Public Bill Office to get the draft of it, thinking that it would be full of holes or weasel words. Actually, it is comprehensive and the Government have been as good as their word. They deserve credit for that.

The last remaining area of concern was that this would be used by my friends in the British Venture Capital Association and others as a way of limiting their capital gains tax on shares which they would otherwise have got, and on which they would have to pay capital gains tax, by changing their employment status to that of shareholder employee. The loss of statutory redundancy pay would not be a major factor in their minds. I very much welcome what my noble friend said about the determination to look at this.

The noble Lord, Lord Pannick, made the key point that the advice provided to someone who is considering an employee shareholder contract should be paid for by the employer but that the tax liability that would normally arise from that would not apply. I guess that the Finance Bill currently before the other place will need to be amended. It already makes provision for the £2,000 of shares not to be subject to tax and national insurance. I assume that it will be amended to provide for the money that is paid for advice by the employer for the employee not to be a taxable benefit. I hope in the time that remains that in considering the various wheezes that might be used to avoid tax the Finance Bill will be amended to close off any possible loopholes.

I entirely support what my right honourable friend the Chancellor of the Exchequer was trying to do with this clause. He was trying to encourage more people to take stakes in their business and therefore to have an interest in the success of the business and an understanding of the risks being taken by it. He was also trying to encourage new emerging businesses, which may or may not have a future and may or may not have very much cash, to take on employees who share in the risks of that business. That is a noble and good intention. Equally, on the other side, there is a desire to limit the costs that fall on employers because of employment protection legislation, and there is a fair balance to be had there.

The combination of the two in this particular recipe produced a dish that was hard to digest, which is why we have sent the legislation back to the Commons on two occasions. On that latter point, although we may have reservations about the applicability of the clause and whether it is the best way forward, we should recognise that this House has done its job in asking the Commons, the Government, to reconsider. At the end of the day it is for the elected House, the other place, to decide on the general drift of policy that is being pursued by the Government.

I thank my noble friend and will have no difficulty whatever in supporting the passage of this Bill with the clause as amended. I look forward to seeing the measures that will be brought forward to avoid a measure that has good intentions being used for another purpose that might very well damage the credibility not just of this clause but of the Government, who deserve credit for what they have been trying to do even if this House had some difficulties with the practical execution of the proposed policy.

[Baroness Turner of Camden]

My Lords, I also agree that substantial concessions have been made, which have been spelt out by the noble Lord. On the other hand, the basic problem still exists in my mind. There are already co-partnership schemes through which employees can have shares and can participate in their companies. However, they can do so in many instances without surrendering important employment rights. That is the important thing. Why do you have to surrender employment rights, which have been in existence for many years and have been struggled for by previous generations, to participate in a shareholding scheme? I do not understand that unless this really is, as I originally believed, one of the moves that the Government are making, as they do not like employment rights all that much, to ensure that employment rights are surrendered without appearing to remove them. Employees can be persuaded, under these arrangements, to give up employment rights voluntarily in return for a shareholding scheme.

I still feel very unhappy about this. Unions will not be happy about it either. The basic point here is the surrender of rights in return for shareholding. I still do not think it is appropriate. Shareholding schemes can exist without that and do exist in many places. For those reasons, I express great concern, although I understand that quite substantial concessions have been made. The core problem, as far as I can see, is the surrender of employment rights for something that may be quite worthless when it really comes to it.

[Lord Bilimoria]

I appreciate that the Government have made several concessions in trying their best, as has been explained, to make sure that this is not compulsory and has not been forced on people. It is another option to add to the several share option schemes that already exist. The huge issue, as the noble Baroness has just said, is why it has to be linked to giving up any employment rights. That is the part that is fundamentally unnecessary.

The last time we debated this, before it went to the other place, I asked the Minister two questions, which he did not answer. The first was whether the Government consulted business properly before going ahead with this. The noble Lord, Lord Adonis, said in his closing speech last time, if I remember correctly, that 160 responses were received when the Government consulted and only three of them were in favour of this scheme. I am sorry, but unless I have got something fundamentally wrong, if you get three out of 160 you do not go ahead with something. You either consult further or you bin the idea because it is no good.

We have heard unanimously all round the House that, from a businessman’s point of view, this does not sense. It is absolutely unnecessary to do this, and it is fundamentally wrong for me to ask any of my employees to give up any rights at all. I would want to give them share options because they believe in my business and its future and they will earn the increase in value of their share options.

The next question I asked the Minister was whose idea it was. Why are the Government pursuing this? This House is greatly respected. We defeated this. It went to the other place. It came back, and the last time we voted on it it was defeated by an even bigger majority. To go back and come back again is disrespectful to this House and to what we have done. I appreciate that concessions have been made, but I think that the Government defending it so much is linked to whose idea it is. The press say that it is the Chancellor’s idea. If it is, I really question his priorities in trying to push forward something like this when tomorrow it is quite possible that we will hear that we may be in a triple-dip recession, and if not we might certainly bump along the bottom for ever.

We have huge problems and we are trying to push something like this on to business. I can guarantee that it will not work, that it will not be taken up by business, that it has wasted a lot of parliamentary time and that it will waste a lot of legislation. The Government say that they will reduce red tape. This is going to create huge amounts of red tape. Lawyers will have to be consulted; employers will have to compensate for lawyers being consulted. This is not just a dog’s breakfast; it is a mad dog’s breakfast.