Growth and Infrastructure Bill

John McDonnell Excerpts

Monday 17th December 2012 Commons Chamber

[Andrew Stunell (Hazel Grove) (LD)]

I tabled amendments 40 and 41. I look forward to hearing what my right hon. Friend the Minister has to say about Government amendments 64 and 65, which go a long way towards meeting the concerns that lie behind amendment 40.

I agree with the hon. Member for Edinburgh South (Ian Murray) in one respect. When the Committee took evidence, we heard from a succession of Jonahs. Neither the TUC nor the CBI was exactly over the moon about the Government’s proposals, and, indeed, all the outside organisations that gave evidence had criticisms to make. I particularly noted the words of a senior employment lawyer, who said, in plain terms, that he would not encourage any of his clients—that is, employers—to take advantage of the measure. The CBI described it as a very small niche product. However, my amendments are intended to deal not with circumstances in which it will be a niche product, but with circumstances in which all the evidence that the Committee received turns out to have been too pessimistic about its success. If that proves to be the case, it is important that the Minister’s plainly expressed intentions are clearly met, and that no employees are forced to accept a deal that they do not consider to be suitable for them and their circumstances. Amendment 40 makes it clear that there should be no detriment to such employees.

I am happy to say that Government amendments 64 and 65 appear to cover exactly the same territory, and—as is the way with Government drafting, as opposed to Back-Bench drafting—probably more thoroughly and comprehensively than I did. I therefore do not intend to press amendment 40, although whether I do so will depend on what the Minister says about the Government amendments. I assume that they are intended to provide safeguards against two possible outcomes. Amendment 64 would prevent an employee who turned down a contract of this kind from discrimination or other disadvantages in the workplace, while amendment 65 would ensure that the dismissal of such an employee constituted an unfair dismissal in employment law. That more or less covers what I was trying to do in amendment 40.

I have not yet been able to detect a Government amendment that matches amendment 41, but, again, I look forward to hearing what the Minister has to say. My amendment is designed to deal with circumstances in which a vacancy arises in a firm that has adopted the proposed structure, and a jobcentre sends someone to the firm to apply for the job. As was pointed out by the hon. Member for Edinburgh South, the current policy of the Department for Work and Pensions is, rightly, that those who are receiving benefit and are directed to vacant posts have a duty to consider them, and, if they constitute reasonable offers of employment, to accept them. If they do not do so, their benefits will be suspended or withdrawn. My amendment proposes that if people refuse jobs because they are offered an employee-owner contract, that will not be grounds for the suspension of their benefits and for them to be put at a disadvantage. If they do not have some protection of that sort, it will be impossible for the Government to fulfil their clear commitment, which was confirmed by the Minister in Committee, that no one would be forced into such a relationship. Again, I look forward to hearing from the Minister, and, having done so, I may or may not choose to press amendment 41.

I hope it is clear to the House that my central objection is not to a new or alternative type of employment contract. I have no problem with that. The problem will arise if the power relationship between employer and employee is so out of balance that the employee does not have the discretion and the free will to refuse and to do something else instead. What I wanted to do, and what my Liberal Democrat colleagues wanted me to do, was ensure that neither those currently in employment nor those prospectively in employment would suffer any detriment in relation to the state benefits system. I look forward to hearing the Minister’s response.

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

I heard what my hon. Friend the Member for Edinburgh South (Ian Murray) said about the inability to amend this part of the Bill, and I sympathise with his view, but I thought that it would be useful for us to test whether the Government’s intention was to adopt a genuine approach to developing the concept of employee ownership or whether this was merely an attack on employment rights. I thought that it would be useful to set out how an employee ownership scheme could be introduced, and that if the Government’s intention was indeed to develop the concept of employee ownership they would support my amendments, or at least commit themselves to tabling amendments to the same effect.

The argument about employee ownership relates to economic democracy. I believe that we should socialise our economy. I believe that individual workers at every level should have control over their own working lives, and that that means democratic control of the firm, the region and the nation. Over the years, the House has debated a variety of methods of bringing that about. We have discussed public ownership, and nationalisation as part of that; co-operation; mutualisation, by which I mean true mutualisation and not the alternative description of privatisation employed by the present Government; and worker ownership models, which have included the extension of employee ownership. A range of models have been discussed over the years, including the Scandinavian model—in which share entitlements are given to the workers and then put in trust, gradually amounting to control of the firm itself—and the individual employee ownership model proposed in the Nuttall review.

[Jeremy Corbyn (Islington North) (Lab)]

Will my hon. Friend confirm that none of the interesting employee ownership and co-operative models that exist throughout the world depend on individual employees giving up their statutory rights to redundancy, maternity pay or access to an employment tribunal?

--- Later in debate ---

[John McDonnell]

Quite the reverse, and as employee ownership has developed in this country, all the arguments have been about the enhancement rather than the withdrawal of rights. However, that can succeed only on the basis of an open, transparent commitment to a partnership in the company concerned. The purpose of the amendments is to offer an alternative to the Government if they are serious about employee ownership.

As I was saying, my proposals are very much in line with the Nuttall review, published in July this year. I propose that when someone has worked for a company for two years, which is the normal qualifying period, and the majority of the other employees agree, that person can become an employee owner and can be awarded the first £2,000-worth of shares. As in normal employee ownership schemes, the longevity of the employee’s commitment to the company is rewarded with the further allocation of shares, usually on an annual basis.

I suggested there should be a further £2,000-worth of shares for every year of service. I am unsure about the nature of the shares that will be offered, but employee ownership shares are normally full voting rights shares; that would be the normal way of developing an overall co-operative. My amendments also suggest employee owners should have the right to elect a director employee owner on to the board, to represent the employee owners. That, too, is in accordance with the standard model of employee ownership. My amendments would also ensure there is no relationship between the award of shares and any reduction of employment rights; I have deleted the measures relating to the exchange of employee rights for the award of shares.

The model my amendments propose is the standard model for an employee ownership scheme, as called for in a wide range of consultations over the years, and recently by the Employee Ownership Association. If the Government do not accept this model, I will fear that their proposals are, in fact, designed to attack and undermine employment rights. In fact, I am now convinced that that is the case, on the basis of the Government’s responses to the consultation. The time scale for the consultation was extraordinary. The Government proposal was announced on 8 October, and the consultation started on 18 October and was completed on 9 November. That is one of the fastest consultations for a major proposal under any Government in recent times, apart from for emergency legislation.

[Ian Murray]

That is an important point. Furthermore, not only did the consultation response come in on the morning we were debating these measures in Committee, but the Government completely ignored it, because the only amendment they committed to introduce was to change the name from employee owners to employee shareholders.

[John McDonnell]

The fact that there was just one cosmetic change shows that the consultation was ignored.

In support of my amendments, it is worth putting on record exactly what the consultation proposed. It found that the majority view was that no one should be asked to exchange their employment rights for shares. The Employee Ownership Association forged an alliance with the Fawcett Society, Family Lives, the Chartered Institute of Personnel and Development, the Family and Parenting Institute and Working Families. They described the consultation response as anti-democratic, rushed and poor quality, even containing a series of factual errors.

The Office for Budget Responsibility found that the Government proposal is more likely to be a cost for the Exchequer than a gain for the overall economy. The OBR said it will cost £1 billion by 2017-18. Others have described it as not particularly welcome. Businesses have certainly not welcomed it. Out of 184 responses to the Department for Business, Innovation and Skills, only two individuals and one organisation voiced support, saying they may take it up. There is hardly a clamour for these measures, therefore.

In none of the evidence submitted in the consultation did anyone describe the giving up of employment rights in this way as being likely to remove barriers to significant increases in employment. The Government’s reform flies in the face of the Nuttall review, too. We thought that there was to be a lengthy period of negotiation and discussion, and the Government would then come forward with proposals for the extension of employee share ownership, which would, in fact, probably receive cross-party support.

[Gregg McClymont]

My hon. Friend mentions the astonishing fact that the OBR says this reform will cost money at a time when, as the Government keep telling us, money is so very tight. Is my hon. Friend surprised that this bonkers reform will cost money? The reform is based on the work of Mr Beecroft, who admitted under examination that there was no evidence whatever to support his proposals, and that they were mainly based on anecdotes and personal experiences.

[John McDonnell]

I am trying to find a Dickensian analogy; perhaps it should be great expectations met by hard times.

I was interested in the TUC response which was supplied to Members. It addressed the potential for this reform to be used for tax-avoidance purposes, through people switching their share schemes and entering into new ones. It appears, therefore, that although there will be no gain in terms of increased employment, this reform will be used as yet another tax dodge.

These proposals also threaten flexible working. As the Fawcett Society says, they will discriminate in particular against women and those who are carers. I thought Members across the House supported flexible working, but it is now suddenly seen as a burden that is to be negotiated away and lifted off businesses. The Equality and Human Rights Commission also expressed concerns about the potential of the Government’s proposals to allow discriminatory behaviour.

My overall assessment is therefore that these proposals are not intended to promote employee ownership at all; rather, they are an attack on employment rights. If the Government were serious about promoting employee ownership, they would either accept my amendments or work them up into a more definitive scheme. I am convinced we would then achieve cross-House consensus in favour of such a scheme. There must not be any link to an exchange of employment rights, however. As I have said, far from serving to promote employment and therefore be a benefit to the economy, it appears these reforms will be an expensive tax avoidance scheme, with up to £1 billion lost to the Exchequer.

I urge the Government to think again and to bring forward proper proposals. As on all such occasions, I give them this warning: legislate in haste and regret at leisure. That is what will occur as a result of these proposals. I am extremely disappointed that the debate has been dragged into the gutter, with attacks on working people. Over the years, so many of us have advocated democratising companies, the benefits of worker involvement in companies and the benefits of extending ownership in companies so people have greater control of their working lives. The Government have demeaned themselves by tacking such proposals on to this Bill in this way. Fresh thought is required if we seriously want to legislate for employee ownership schemes.

[Gordon Birtwistle (Burnley) (LD)]

My first question is: where are all the Members who are supposed to be supporting this Bill?

I believe in freedom of choice. If an individual wishes to work for a company on a contract such as that which is proposed, they should be able to do so. That will not be the case in the big industries. Rolls-Royce and Jaguar Land Rover are not going to get involved. This scheme is for small niche companies in the high-risk sectors, such as high-tech firms and website designers, which employ recent graduates who want to get involved in such firms because they hope they will become a second Google. These companies are the gamblers that grow and create jobs in the future. I cannot understand why this Parliament should stand in the way of these people and say, “I’m sorry, but you can’t do that, even if you wish to do so.”

I think back to the 1960s when I was 24 and I had just come out of my apprenticeship. I went for a job as a contract draughtsman. I was offered two alternatives by the company. It was a good company, and it said I could have all the schemes it had, such as holiday pay and a contract for 44 hours of work a week—those were the hours we used to work in those days—and I would have a fixed rate. Alternatively, the company said I could have none of those schemes and have four shillings an hour more than everybody else was getting. I was keen to earn extra money, because I wanted to save up and put a deposit down on a house, so I decided not to have any of the conditions laid down by the company. I decided, on my own back, as I had the freedom to do so, to take extra money for working as many hours as I wished while having no contractual employment. I did that for two years and managed to raise enough money to put down a deposit on a house. That was my choice and it was the company’s choice to offer it to me. Other people worked there who wished to carry on with the conditions they had, but other young guys like me wanted to raise as much money as they could to put down deposits on houses, buy new cars and so on, and they went ahead and did it. They were free to do it—there was no pressure.

--- Later in debate ---

Let me now turn to the Government amendments.

[John McDonnell]

I tabled a further amendment, amendment 39, on the breaking of the link between employee share ownership and the exchange of employment rights. Is the Minister going to deal with it?

[Michael Fallon]

The hon. Gentleman is right to chide me, because I have missed out that amendment. If I discover it in time, I will try to return to it.

The Government amendments form a package of comprehensive measures that will strengthen the Bill’s provisions for companies and people. They respond to important points raised during the consultation, on Second Reading and in Committee. I hope that they fulfil the undertaking I gave the shadow Secretary of State to ensure that amendments, whether or not he agrees with them, were at least produced before the Bill leaves the House.

First, amendments 22 to 28 would amend the Bill to change the name of the new status to “employee shareholder.”—[Interruption.] Hon. Members cannot have it both ways; they cannot criticise the consultation and say that we did not listen to it when we did. When organisations asked us to change the name, we did exactly that. During the consultation we received comments on the name “employee owner”. I recognise that “employee owner” might be seen as confusing in relation to the wider employee ownership agenda. It is important that we do not confuse people. The name “employee shareholder” is far better at describing the new status, as it links the concept of employment and shareholding.

Secondly, amendment 29 ensures that employee shareholders who are parents can request flexible working once they return from parental leave. The parental leave directive requires that parents should be able to request flexible working after their return from a period of parental leave. The amendment ensures that the UK will be compliant with the directive. We have decided that employee shareholders should have to make a request for flexible working within two weeks of their return. The time limit gives companies employing employee shareholders certainty about the working patterns of their work force.

Let me turn to the issue of shares and what happens to them at the end of the employment relationship, on which we sought views during our consultation. We believe that employers and employee shareholders are likely to agree sensible terms for the disposal and buy-back of shares in order to ensure that the shares have the necessary value to meet the conditions for employee-shareholder status. The Bill is drafted on that basis.

It is not the Government’s intention that employee shareholders should be left with shares that they can sell back to the company only at prices that are unfair or where the buy-back arrangements would leave the employee at a financial disadvantage if there is no other way of disposing of the shares for value. We therefore believe that it is prudent to seek a power in the Bill to allow the Government to set a minimum value for the buy-back of shares if the company and employee shareholder enter into a buy-back agreement. Amendment 30 creates that power. Let me be clear for the House that the power will be used only if it is needed to safeguard employee shareholders in the unlikely event that employers behave unscrupulously.