Growth and Infrastructure Bill

Julian Smith Excerpts

Tuesday 16th April 2013 Commons Chamber

[Michael Fallon]

I certainly can. It is not possible, under the procedures of the House, to place the guidance in the Library before I have first explained it to the House, but I will lay the draft guidance in the Library as soon as the transcript of this afternoon’s debate is available.

Let me be clear about what the draft guidance will mean. It will mean that a jobseeker cannot be compelled to apply for an employee shareholder job, nor can their jobseeker’s allowance be reduced or cut if they turn down an offer of an employee shareholder job or refuse to apply for an employee shareholder job. This explicit change to the guidance puts beyond any doubt our intention that no one should be forced into this new status.

While the benefits of the new status are considerable, it will not suit all companies or individuals—and we have never pretended that it would. It is up to companies and individuals to decide, and we have published guidance for individuals so that they fully understand the implications. That guidance sets out the employment rights associated with these jobs, the risks and rewards of being a shareholder, and other factors they may wish to consider before deciding whether to accept an employee shareholder position.

We are now, therefore, debating an employment status that is absolutely voluntary. Jobseeker’s allowance claimants will not be penalised if they do not want to apply for employee shareholder roles. Existing employees can turn down the offer of an employee shareholder contract from their current employer without fear of suffering a detriment or being dismissed if they say no.

[Julian Smith (Skipton and Ripon) (Con)]

Will the Minister confirm that there has been great excitement in many areas of the business community, especially in smaller tech companies, which is a positive reinforcement of the Government’s enterprise policies? We should pay tribute to the Minister for bringing this exciting proposal forward.

[Michael Fallon]

I am grateful to my hon. Friend. We have never specified the type of company that is most likely to take up this new status, but obviously younger companies at the beginning of their lives will be able to use this status at a time when they might not be able to pay their staff more than competitor companies, or those already established in the marketplace. They will therefore have an extra edge to offer to those individuals whom they wish to recruit. We have had much interest already from such companies, who see the new status as an exciting way to motivate their new work forces.

Protections for people do not end there. The Bill confirms that someone can be an employee shareholder only if they are given at least £2,000 worth of shares, and if they are not the person will not be an employee shareholder and will have all the normal employment rights that are associated with employees.

Clause 27 also stipulates that a person can be an employee shareholder only if they receive fully paid up shares. This means that the employee shareholder will not be liable for any debts should the company fold. Of course there will be circumstances where an employee shareholder leaves the business. It should be apparent from all that I have said that it is not the Government’s intention that employee shareholders are left with shares that they can sell back to the company only at prices that are unfair or where the buy-back arrangement would leave the employee shareholder at a financial disadvantage if there is no other way of disposing of the shares for value.

On Report in this House, we introduced an amendment to make a power 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. That reserve power will be used, if it is needed, to safeguard employee shareholders in the unlikely event that employers behave unscrupulously. By including these protections we are ensuring that individuals understand the implications of employee status and are genuinely free to decide whether to accept it. No one can be pressurised, bullied or coerced into accepting this new status.

With this announcement of further explicit protection for jobseeker’s allowance claimants, I urge hon. Members to disagree with the other place and reinsert clause 27 into the Bill. The new employment status gives young companies in particular a new option that they can use to attract high-calibre individuals to help grow their business. It is important that we give companies that choice, but it is also important that we give people this opportunity to share in the growth potential of the company they work for. The clause should be part of the Bill.

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[Nick de Bois]

The biggest step someone takes when they start a small business is employing someone. They cease to be a sole trader working in their own environment; their own boss without responsibility for anyone else and having to meet only their own needs and those of their family. They do not want to take that step chained by too many onerous responsibilities too early on. They seek therefore to strike a deal with their investor or partner, and in return for that flexibility they do not ask for a single penny in cash to invest in the business. That is a good deal. I would have taken it, had it been on offer to me and had I faced these regulations.

[Julian Smith]

My hon. Friend is describing very effectively the challenges facing a new small business. Does it not surprise him that the Opposition, particularly the shadow anti-business Secretary of State, are so negative about these supply-side changes?

[Nick de Bois]

I am not surprised that the hon. Member for Streatham, who speaks very eloquently, expresses his support for employee and share ownership, but neither am I surprised that while expressing their support the Opposition will probably vote against it.

I want to leave the House with one thought. We all want Britain to succeed. We know, from the statistics that we have traded across the Floor many times, that growth will come from the small and medium-sized enterprises that dominate our economy. The small businesses that I believe will take up this offer—I believe the Government also recognise this—will become the medium enterprises that are so critical to our growth.

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[John McDonnell]

That leads on to my second point—I do not want to delay the House. This measure opens up the process of recruitment, retention and promotion to potential victimisation and abuse. Despite the formal protections that the Government assure us will be put in place, the reality is that informal pressures will be put on those who wish to be recruited, retained or promoted and these will override the formal protections. Those who have represented people at tribunals and elsewhere will know that it is extremely difficult to prove victimisation and bullying in the work force. Those informal pressures will eventually undermine the credibility of the scheme. My fear is that they will also undermine the credibility of employee share ownership schemes overall.

Thirdly, I look forward to reading the draft regulations and guidance on protections for jobseeker’s allowance. However, ministerial statements on JSA protections in recent months, as recorded in Hansard, have proved not to be worth the paper they are written on. I refer to assurance after assurance we were given that there were no targets for sanctions in individual jobcentres, when we now have concrete evidence that that is the case. Ministerial assurances on the operation of JSA have so far not proved to be effective. I believe that, at the end of the day, they will prove not to be effective in this case either, because the same informal pressures will be put on jobcentre workers to meet targets for sanctions overall.

Finally, this measure sets an extremely dangerous precedent. The idea of selling rights could creep into other areas of policy making. For example, will landlords in future be able to offer reduced rents for reductions in security of tenure? Will consumer rights be sold for a reduction in the price of particular goods? That is much more significant than the scheme being proposed in this debate. The idea that rights can be sold in any sphere of government activity sets a dangerous precedent for the future development of rights in this country.

[Julian Smith]

Does not the hon. Gentleman agree that businesses throughout Britain have been laden down with regulation, particularly in employment, and that we have to try constantly to make it easier for them to take people on, particularly at the moment, when we need to do that to create jobs?

[John McDonnell]

With the greatest respect to the hon. Gentleman, I disagree. We have heard this argument about the overburdening of regulation year after year, and it is usually used as a justification to give employers the facility to sack people, cut their wages or undermine their employment rights.

--- Later in debate ---

[Julian Smith]

I want to speak briefly in support of my hon. Friend the Member for Enfield North (Nick de Bois) and talk about the narrative that is developing among Opposition Members. We heard the same bleating for settlement agreements and we have heard the same rhetoric for these proposals. We have heard no tangible idea from the Opposition of how we might make life easier for the thousands of small businesses in North Yorkshire that are creating the bulk of the jobs in my constituency or for the tiny companies across the UK that are struggling with the six regulations a day that Labour piled upon them.

The proposals that we are discussing are part of a suite of proactive measures to make business easier in this country. Business was laden with regulation, taxation and more and more bureaucracy by the Labour party in power. We—our party and this Government—are doing absolutely the right thing by looking at every opportunity to find ways to make life a bit easier for the hard-working men and women who are waking up in the middle of the night, worried about whether they can pay staff the next day. I commend these proposals and the others that the Government are making across the range of their enterprise policies.

[Mark Lazarowicz]

I, too, would like to say a few words about this proposal of shares for rights. Of the various types of employment legislation that have come before this House over the years—these provisions are basically employment legislation—there can scarcely have been any with as few friends, on either side of industry. I welcome the fact that the House of Lords did its revising job well and removed the offending clause. I am only sorry that the coalition parties, Conservative and Lib Dem, have chosen to bring it back today, instead of withdrawing quietly and gracefully.

Given that this provision has so few friends, I suspect that very few employers will want to make use of it. That is because employers who want to extend employee share ownership, of which I am a great supporter—the year after I entered this House I introduced a private Member’s Bill to promote it—will not want to do so in ways that force their employees to give up important rights at work. The type of employer who wants to work with their employees is not likely to be one who at the same time wants to alienate them by taking away their rights, which is what this measure would force such employers to do if they made use of it. Of course, it is hard to see any employees volunteering to adopt such an arrangement either. I suspect that employers who would make use of the measure would be those who are in difficulty.

I take the point that was made earlier about businesses that want to start up and take on more workers making use of the scheme, but the problem is that, although a new business could behave with the best will in the world in involving its workers in a collective enterprise, it will be when things go wrong and people fall out that those workers will need the protection that is enjoyed by the workers of this country. That is why we should be loth to throw that protection away.