David Mowat
Main Page: David Mowat (Conservative - Warrington South)
Ian Murray
I suspect that we shall see two developments. We shall probably see an advertisement for employee ownership contracts in the first instance, and we shall probably see unscrupulous employers offering contracts on an employee-ownership basis to people when they feel that it will not be in the best interests for those people to be on normal full-time contracts. [Interruption.] Ministers are shouting “You cannot answer the question” from a sedentary position. I should like the Minister of State to come to the Dispatch Box and give a cast-iron guarantee that not one employee in the country, either in or out of work, will be forced to accept one of these contracts. I can assure him that that will not be the case.
Ian Murray
I am running out of time, so I shall canter on, if I may.
There are so many unanswered questions that I should probably be here until midnight if I dealt with them in detail, but let me give a little of the flavour of what people have been saying to me. I hope that the Minister of State has had his pencil sharpened so that he can take all this down.
First, the value of shares that employees receive in return for relinquishing their rights is wholly inadequate. It may also be difficult in some instances for employees to value the shares accurately, or indeed to realise fair value in the event of sale. Those problems are all the more pronounced given the absence of provision for independent legal and financial advice for employees.
Secondly, the administrative costs of valuing and issuing or allotting small numbers of new shares to a great many employees may be prohibitively high for business. If there is no market, companies may have to purchase the shares back, which will impose a huge financial burden on them.
Thirdly, most of the businesses involved will not be listed. Who will value the shares, what voting rights will be attached to them, how can they be redeemed or transferred when they have no real market value, and who will deal with any disputes that arise?
Fourthly, at a time when an employee wishes to sell, on redundancy or otherwise, the company is likely to be performing poorly, which is why staff are being laid off. That means that the shares will be worth less, or indeed worthless. What happens if a business issues more shares to itself to dilute staff holdings prior to any redundancy? What about dilution in the event of further investment in the company?
Ian Murray
I will give way to the hon. Member for Warrington South (David Mowat), who was a member of the Committee considering the Enterprise and Regulatory Reform Bill.
David Mowat
I was indeed.
Every year, thousands of people who work for firms of lawyers and accountants give away all their employment rights by joining the partnership, thus taking a stake in the business. Why are Opposition Front Benchers opposed to the extension of that principle to ordinary people in ordinary companies?
Ian Murray
I think that there is a slight difference between people who take on a partnership in an accountancy firm and people who embark on training.
Fifthly, what will happen to PAYE and national insurance contributions? At present, any shares “in kind” would be subject to the usual Inland Revenue rules.