George Howarth
Main Page: George Howarth (Labour - Knowsley)(1 year, 9 months ago)
Commons ChamberA Ten Minute Rule Bill is a First Reading of a Private Members Bill, but with the sponsor permitted to make a ten minute speech outlining the reasons for the proposed legislation.
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I beg to move,
That leave be given to bring in a Bill to make provision for a new employee share ownership scheme allowing preferential access for lower income workers; to reduce the Share Incentive Plan holding period from five to three years; to require companies to include declarations in annual reports about the type of employee share ownership plans that are operated and the level of employee take up; and for connected purposes.
This Bill has broad support across the House, as the list of sponsors will demonstrate. Politically, it fits neatly with most ideological traditions. From a Conservative viewpoint, it chimes with the ambition for the UK to become a property-owning, share-owning democracy. From Labour’s perspective, it resonates with the historical commitment to co-operation, although by different means from the traditional par value model, and it provides a means by which the relationship between capital and labour can be modestly realigned.
As I will demonstrate, the Bill has the support of nationalists and Unionists and Liberal Democrats, who see the benefits to employers and employees as being consistent with their respective political outlooks. Employee share ownership has been supported by a diverse range of organisations, including the CBI, the Social Market Foundation, the TUC and the Co-operative party. The CBI, for example, has stated:
“The moral case for financial inclusion is a compelling one—people have a right to their dignity and financial exclusion denies them that right.”
Similarly, the Social Market Foundation pointed out:
“As the UK economy emerges from the Coronavirus pandemic, now is a good time for government to push for higher rates of employee share ownership.”
The TUC has said that, subject to certain conditions—for example, a preference for collective schemes and them not being used as a substitute for collective bargaining and trade union involvement—it supports employee share ownership.
This Bill aims to update two of the current share ownership schemes—the share incentive plan, known as SIP, and the save-as-you-earn system, known as SAYE or Sharesave—and proposes a third scheme. The reason the two existing schemes need to be updated is that, over recent years, the number of such plans has been plateauing and, in some cases, falling. The Treasury’s own data acknowledge that trend. The number of firms that granted a new SAYE option in 2021 was 260, a fall from 340 in 2007. Overall, employees were awarded or purchased shares in 400 companies, compared with 570 in 2011-12.
There are several reasons for that decline. First, SIP and SAYE were introduced 22 and 42 years ago respectively. In the intervening years, employment practices have undergone significant changes, and the schemes no longer reflect those changes. For example, the length of time an employee spends at a company has markedly reduced. Indeed, young people are often encouraged to move jobs more frequently to secure career advancement. The Social Market Foundation has said:
“Among the poorest half of people aged 25 to 34, typical net financial wealth among those who are not employee shareholders was just £77. But among employee shareholders, wealth stood at £750.”
That being the case, the five-year minimum investment commitment for SIP schemes, to ensure maximum tax efficiency, is no longer realistic.
The fact that the Government offer tax advantages to employee share ownership is, of course, welcome. The risk, however, is that without updating them, they could become increasingly obsolete. For that reason, the Bill would reduce the commitment from five years to three, to achieve maximum tax efficiency, as advocated by ProShare, the industry representative body. Moreover, many employers believe that such a change would make them more likely to offer SIP schemes.
Another problem is that current plans apply only to those on pay-as-you-earn. There are now, however, some 4 million people who work in the so-called gig economy. A further provision in the Bill would create a new plan that does not depend on regular monthly contributions and is accessible to those in less regular forms of work. It would enable employers to give a free share award to their employees, to be held for a year, after which it could be realised at a discount value, as in SAYE schemes currently. That would be attractive to younger staff, who may not envisage staying at a company for three years, let alone five.
The other provision in the Bill is to require the Treasury to carry out a consultation with all the relevant bodies, including those I have referred to, with the aim of modernising employee share ownership to reflect the changes that have taken place since the existing schemes were introduced. One new idea that could be consulted on is allowing employees to access the holding built up in their share incentive plan in a tax-efficient and advantageous manner that, under the current scheme, is only available after five years, with regular contributions made over the last one year, without a penalty being applied.
Before concluding, I would like to say a few words about the benefits that such schemes bring to employees and employers. Two examples illustrate the benefits to employees. First, Pets at Home staff—mainly shop floor staff working in retail—who participated in the company’s SAYE scheme have made an average gain of £21,000. That is a healthy return on their investment and an increase in their financial resilience. Secondly, as ProShare’s annual survey shows, the average value of a participant’s shareholding at the end of 2021 was £10,295—again, a significant sum.
Employers gain too. As the CBI and the Social Market Foundation pointed out, employees having a stake in the company they work for provides important productivity gains, as well as boosting innovation and corporate long-termism. I hope this Bill will be a good starting point in encouraging and expanding employee share ownership and enabling the potential benefits to all concerned to be realised.
Question put and agreed to.
Ordered,
That Sir George Howarth, Margaret Beckett, Kirsty Blackman, Sir Graham Brady, Philip Davies, Mr Jonathan Djanogly, Dame Margaret Hodge, John McDonnell, Esther McVey, Sarah Olney, Jim Shannon and Gareth Thomas present the Bill.
Sir George Howarth accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 3 February 2023, and to be printed (Bill 183).