Growth and Infrastructure Bill

Iain McKenzie Excerpts

Monday 17th December 2012 Commons Chamber

[Mr Iain McKenzie (Inverclyde) (Lab)]

I firmly believe that there is nothing in the Bill to address the root cause of the problem that faces us—the Government’s economic failure. Our economy is only just back to the size it was a year ago, and we have seen a double-dip recession and increased Government borrowing. Adding “growth” to the title of the Bill will not make it so. Even the Prime Minister admits that we cannot legislate for growth.

As we have seen, the Government’s economic plan has plunged Britain into the longest double-dip recession since the second world war. To cover that, they have hurriedly pulled together this flawed piece of legislation. There is nothing in the Bill to address our problems of economic failure; instead, the clause on employee owner shares for rights will only make it an attack on workers’ rights.

The proposals announced by the Chancellor will allow businesses to offer individuals contracts and a new employment status to make them employee owners. Under that new status, employee owners will receive shares in the employer’s company. However, as we know, there is always a catch: in return, employee owners will have to give up certain employment rights, including those on unfair dismissal, statutory redundancy pay and requesting flexible working and training. The scheme has not won support from the business community; a 33-week consultation had more than 200 responses but only five businesses said they would be interested in taking it up.

Labour is in favour of employee ownership, but not coupling it with slashing employment rights. Doing away with people’s rights at work is wrong in principle and will do nothing to bring about growth in our economy.

There are concerns about the full cost of the scheme. It has been said that

“the cost is expected to rise towards £1 billion,”

and:

“Uncertainties abound like assumptions on take up rates, the average value of shares that are entered into the scheme, the extent of tax planning and the timing of disposals.”

According to the Office for Budget Responsibility, a quarter of the £1 billion additional cost—£250 million—is expected to arise from tax avoidance as a result of the scheme.

Slashing the rights of people at work is wrong in principle and will not help bring about jobs and growth; the proposal is yet another example of how out of touch this Government are. The scheme has not won support from business; it has received at best a lukewarm reception. Not even the CBI supports the proposals and called them

“niche…and not relevant to all businesses.”

As we have heard, the chief executive of Sainsbury’s was not exactly over the moon about them either. He was hardly embracing them when he said:

“This is not something for our business...What do you think the population at large will think of businesses that want to trade employment rights for money?”

We all know what we think about that.

[Jim Shannon (Strangford) (DUP)]

Earlier on, there was a reference to Ebenezer Scrooge. Is it not more a case of the grim reaper going deep into the rights of employees?

[Mr McKenzie]

The hon. Gentleman makes a very good point. There are stark connotations for employees across the country if the scheme is put into practice.

[Jeremy Corbyn]

My hon. Friend is making an important point. Does the proposal not indicate the Government’s thinking? They are quite prepared to offer the carrot to many companies that they can simply buy out rights at any time in the future. Next time it might be a cash offer or something like that. We legislate to protect all workers. We legislate for all women to have maternity rights. We legislate for everybody. It is not up to a company or a Government to pick and choose who should be eligible for those rights.

[Mr McKenzie]

My hon. Friend makes a very good point; I could not agree more.

The Chancellor proclaimed that the proposal represented

“owners, workers and the taxman, all in it together,”

but the measure is divisive, goes against the spirit of one nation and risks creating a two-tier labour market across the country.

Offering employee owner contracts, where employees effectively sell their employment rights for shares, is unlikely, if ever, to deliver the highly motivated, engaged work force employers need. Ministers should be making it easier to hire employees, not easier to fire them.

Labour’s jobs plan includes tax breaks for small firms taking on extra employees. Labour supports employee ownership, but not coupling it with slashing employment rights. The US National Centre for Employee Ownership, one of the world’s leading groups promoting share ownership, has also criticised the scheme. The proposal smacks of fire at will. Although Ministers, including the Business Secretary, have claimed they are not going to take forward Mr Beecroft’s fire at will proposals, in practice they are introducing them by the back door. Ministers are trying to introduce the scheme without proper consultation or discussion, or indeed any real support.

The way the scheme will operate in practice and its ramifications are unclear. There are concerns about other ways in which the scheme could have an adverse impact on employees. Will jobs be advertised as being only employee owner and will employers be able to impose the scheme on individual employees or groups of employees? What safeguards will there be to ensure that the scheme is voluntary for existing employees, as Ministers claim?

The clause is a disaster for all, be they employees or employers, and it will not deliver growth in our economy. Businesses that utilise the scheme in recruiting will be recruiting from a smaller pool of talent, which will risk their not being able to take advantage if ever a real recovery comes about.

People giving up their hard-fought employment rights in return for a few shares beggars belief and takes this country back to the dark ages of employment practice. I ask that the clause be dropped.

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

We have had a good and reasonably balanced debate about the merits of the new employment status created by clause 25. I fully accept that there are concerns about it. Some of them are genuine and I hope to address them a little later. Some are based on a misunderstanding of the intent behind the new employment status and others take no account of the Government amendments that have already been tabled.

I will try to address all the points raised by hon. Members, but I first want to resist the casting of the hon. Member for Edinburgh South (Ian Murray), who suggests that I represent Scrooge in “A Christmas Carol.” Perhaps I could refer him to a better character, Scrooge’s older employer, Fezziwig, who was noted for the magnanimity he displayed towards apprentices and young workers and for the generosity of his Christmas party. Such generosity, I suggest to the House, is reflected in the new opportunities we are extending for share ownership and in the very generous tax relief that comes with it.

Clause 25 creates a new employment status—employee shareholder—in addition to the existing employment statuses of worker and employee. The United Kingdom already has differing types of employment status with different levels of rights and different obligations, to allow businesses and individuals to choose the right type of contract that suits their particular circumstances. It is important, therefore, before we come to consider the new status, that the House understands the differences between existing employment statuses, because each has different employment rights.

Employees, for example, have all employment rights, whereas workers do not have unfair dismissal rights, do not enjoy the right to statutory redundancy pay and do not have other statutory rights. Workers, however, do have the right to the national minimum wage and do have protection against unlawful deductions from their pay, paid annual leave, rest breaks and protection against discrimination, including on the ground that they work part-time. The statuses of worker and employee are distinguished by the level of control and obligation that the employer has over the individual. The employer has a higher level of control over an employee—he can dictate how, when and what an employee does, whereas an employer cannot dictate in the same terms how a worker carries out his work.

The new status that we are considering carries the same level of control as an employee, but links employment with shareholding in the company. Individuals in the new status will have similar rights to employees, but they will not have the right to statutory redundancy pay, the statutory right to request flexible working unless they have returned from parental leave, time off to train, or unfair dismissal rights except for automatically unfair reasons. The new status is designed to give companies more choice in the type of employment contracts they can use to structure their work force. But the flexibility that businesses have is not restricted to different types of employment status. Businesses may already choose to take on somebody as part-time, full-time, permanent or for a fixed period. The important principle underlying the Government’s approach is flexibility. We want to allow businesses a choice of which type of employment contract to use. This new status gives companies an additional option, should they wish to use it. They do not have to use it if it does not fit their business model.

We consulted in October and November on how we could best implement the new employment status. Our consultation lasted for three weeks and we received more than 200 responses. Those were very helpful, along with the discussions that we had on Second Reading and in Committee, and helped us address the areas of the policy that need improving with the set of Government amendments before us. Before I deal with those, let me consider the points raised on the other amendments.

The hon. Member for Hayes and Harlington (John McDonnell) tabled amendments 37 and 60, which would limit how companies can use the new employment status so that, in effect, they could offer it only to existing employees with at least two years’ service. The Government are creating a further employment status to provide additional flexibility and choice for companies in managing their work force. Allowing businesses greater flexibility in how they manage their work force encourages growth and confidence, and the difficulty that I have with the hon. Gentleman’s amendments is that they are restrictive and remove choice from employees and employers.

The employee shareholder status is a novel way for companies to arrange their work force. From its inception, it was principally intended—I think this was the point made by my hon. Friend the Member for Burnley (Gordon Birtwistle)—for fast-growing new companies. The amendment to limit the new status to existing employees would deter or even prevent many newer companies from making use of this innovative and flexible model. It would also prevent new or newly recruited employees from taking advantage of the status that existing employees might already enjoy. As I have just reminded the House, we decided to create a new employment status to give companies additional choice about the contract types they can use for those who work with them and for them.

Amendment 61 would cause inflexibility in the decision-making process for companies by giving their existing work force a veto over the type of employment status which the company may choose to use. The result of the inflexibility caused by amendment 61 would come at a time when companies need to be agile and innovative to respond to changing economic circumstances. Furthermore, we do not force companies to consult in this way if they decide to take on people as workers or as employees. I suggest to the hon. Gentleman that the new status should be no different. The decision on how to structure a work force is for companies to make. They are the ones best placed to determine how they go about employing staff, and the responsibility for deciding which employment status to offer should rest with them. Nor would the amendment be fair to employees in the work force who may wish to take up the option.