Living Wage
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie(10 years ago)
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Viscount Younger of Leckie
I certainly agree with the noble Lord that we are encouraging more employers to be productive. Much work has been done to that effect but I point out to him that the minimum wage is now increasing faster than earnings. The rise of 3% in the adult rate will mean that low-paid workers will enjoy the biggest cash increase in their pay packets since 2008. A rigid formula does not allow for changing economic circumstances, for example imposing a target set by politicians. That would result in job losses if it is set too high and lower earnings if it is set too low.
Lord Forsyth of Drumlean (Con)
My Lords, does my noble friend not agree that the most important thing is take-home pay and that therefore the Government’s efforts to reduce the burden of tax on the low aid are what matter? Does he not think that an Opposition who refuse to deny that they would increase national insurance if they were in government have a cheek talking about the effect on living standards of taxation?
Viscount Younger of Leckie
My noble friend makes some good points. The only real way of achieving sustainable increases in living standards is through focusing on economic growth, employment and reducing taxes for the low paid, as he said. Christine Lagarde, the managing director of the IMF, said recently that the IMF had,
“underestimated the growth of the UK economy”.
In a significant turnaround, the fund’s latest assessment found that the UK economy had rebounded strongly.
National Minimum Wage
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie
Viscount Younger of Leckie
My Lords, the naming and shaming scheme, as the House will know, came into effect on 1 October 2013. The new rules are part of the Government’s efforts to toughen enforcement of the national minimum wage and to increase compliance. By naming and shaming employers, it is hoped that bad publicity will be an additional deterrent to employers who would otherwise be tempted not to pay the national minimum wage. The Government have accepted the Low Pay Commission’s recommendation of the first real increase since 2007. We welcome its assessment, and 2014 could mark the start of a new phase of bigger real increases in the minimum wage.
Lord Forsyth of Drumlean (Con)
My Lords, does my noble friend agree that what matters is not the minimum wage but how much of your wage you take home in pay? Is not the Chancellor to be congratulated on implementing the policy of raising the tax threshold so that more of that money is kept—a policy, incidentally, first put forward by my noble friend Lord Saatchi some years ago but which, rather like pedestrian crossings in a constituency, has been hijacked by the Liberal party?
Economy: Business Investment
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie
Viscount Younger of Leckie
Business investment is a very narrow measure, which excludes investment by firms in skills, innovation and organisational change. When estimates of these types of investment are included, the UK’s performance is much improved, as we tend to invest heavily in these types of knowledge asset. It is also important to recognise that quality of investment is as important as quantity.
Lord Forsyth of Drumlean (Con)
Has my noble friend noticed the disinvestment that is taking place in the energy sector, thanks to the irresponsible policies announced by the Opposition to bring in price controls?
Viscount Younger of Leckie
Yes, I have noticed that. Having said that, we are doing much in terms of the Green Investment Bank, which has invested directly and indirectly in 22 projects from five dedicated funds. It has directly committed £791 million, which will mobilise a total of £3.3 billion when fully deployed.
Businesses: Employee-shareholder Scheme
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie
Viscount Younger of Leckie
First, my noble friend is probably referring to the Royal Mail rather than the Post Office. I can say that around 150,000 eligible Royal Mail employees have been given shares under the free shares offer. Only 372 employees opted out of the scheme, which means that approximately 99.75% of eligible employees received the free shares that they were offered. This is the largest employee-share scheme of any major privatisation for 30 years.
On my noble friend’s second point, the national minimum wage is a vital safety net in protecting the low paid. We have already said that we need to do more to make sure that the benefits of growth are shared fairly. My right honourable friend in the other place, Vince Cable, has asked the Low Pay Commission to extend its expertise to look at what economic conditions would be needed to allow the national minimum wage to rise. The convention is that if there is a rise, it will commence in October, and that the report will be in the spring of 2014.
Lord Forsyth of Drumlean (Con)
My Lords, will my noble friend indicate whether the Government are happy that the private equity industry is using the employee-shareholder scheme to create incentives for highly paid executives that will enable them to be awarded shares and avoid capital gains tax?
Viscount Younger of Leckie
My noble friend would expect—and will not be surprised—to hear me say that it is not my department’s responsibility to formulate tax policy, and that the figures that were given during the course of discussions on the Bill were very much estimates.
Consumer Protection
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie
Viscount Younger of Leckie
My Lords, the powers strike a balance between protecting civil liberties and reducing burdens on business and enabling enforcers to tackle rogue traders. Requiring enforcers to give 48 hours’ notice before carrying out routine inspections will benefit businesses by making it more convenient for them to accommodate these inspections. However, notice need not be given, for example, where it would defeat the purpose of the visit, as when a breach is suspected, such as with counterfeit DVDs.
Lord Forsyth of Drumlean (Con)
My Lords, will the Minister, in responding to the request of the noble Lord, Lord Kennedy, for protection of consumers from unfair practices, look at helping those people who find that, without their knowledge, they are signed up for membership of trade unions or the Labour Party?
Viscount Younger of Leckie
My noble friend may be aware that there is a Bill going through Parliament at the moment and I am at the Dispatch Box later.
Growth and Infrastructure Bill
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie
Viscount Younger of Leckie
The noble Lord makes a good point. The matter of what types of shares and what shares are offered is very much left to the employee and the employer. That is a negotiation between the employer and the employee. The Government will not prescribe how that will come about because there are different types of shares, as the noble Lord will know only too well from his experience. It will very much depend on the type of company, the wishes of the individual who may be looking at an employee shareholder role, and the employer.
Lord Forsyth of Drumlean
I am most grateful to my noble friend. When he says that the valuation and the convertibility of the shares will be a matter of negotiation between the employer and the employee, it is hard to see what the employee’s negotiating position would be. At the very least, should not the employee be given independent legal advice as to the valuation and the nature of the transaction he is entering into, which, after all, applies under existing employment law for compromise agreements and things of that kind? If it is to be a negotiation, surely the employee has to be informed, and not all employees will be particularly financially literate or employment experts.
Viscount Younger of Leckie
The matter of advice is very much applicable to settlement or compromise agreements, as my noble friend has pointed out. This concerns entering into an employment agreement, and therefore we do not see this as being appropriate. On the issue my noble friend has raised concerning share valuation, as he well knows, there are established means through actuaries whereby shares are valued. That is done all the time and it is a straightforward process. Again, that is very much a matter between the employer and the employee.
Viscount Younger of Leckie
I can only reiterate that it entirely depends on the role on offer, the type of company and the type of employer as to how the discussions will go. An individual taking on a normal role, if I may put it that way—an employee role or a worker role—may find that sort of contract complicated, in which case they may have obtained their own advice and are still free to do so. This is a wholly different—
Lord Forsyth of Drumlean
I am most grateful to my noble friend for giving way and I shall try not to interrupt him again. However, can he explain to me why employment law as it stands requires employers entering into a compromise agreement to provide legal advice in order to make that agreement stand? They usually provide a reasonable amount of the cost of independent legal advice. If that is appropriate for a compromise agreement where people are surrendering certain of their rights, why should it not be appropriate where people are giving up their employment rights and entering into what may be a complicated and major financial decision, given the proposed levels of tax relief with capital gains relief of up to £50,000? What is the Government’s logic in saying that advice should be paid for by the employer in one case but not in this case?
Viscount Younger of Leckie
I know of many employee contracts—not those for an employee shareholder—where serious advice is required. However, the status of being an employee shareholder is wholly new. The individual concerned may well require advice but noble Lords are talking about the circumstances of entering the employment phase and the proposal we are discussing would set a new precedent. As we know, often very difficult discussions take place towards the end of the employment contract. That is where it has become the custom and practice for companies to pay fees. That is the difference. I hope that I may be allowed to move on.
The recruitment of skilled personnel is normally taken very seriously. It takes time and commitment and involves searching for suitable candidates, sifting applications and interviewing. This will be no different with the new employment status. In fact, companies will need to take time to consider whether this type of contract is right for them. The owner of a company offering the status should think about the impact of giving up equity in the company. This is a decision that is not easily reversed, as once you have given away your shares it may not be easy to get them back. We must remember that the owner is giving away a stake in the company. Companies will need to be sure that the person to whom they offer the contract is right for the company. An employee shareholder may be able to influence the decision-making of the company and take a share of the profits. This is not something a company would do without being sure that it was the right move for them.
The new status will not be applicable or suitable for all companies or all individuals but it might be right for some. This new employment status represents more choice for individuals and companies. I have been clear throughout our debates that the status is voluntary. Indeed, it may well be used only by a minority of companies, but what is important is that we allow them to choose what is right for their own personal and commercial circumstances.
Lord Forsyth of Drumlean
On this point of the valuation of shares, could my noble friend deal with the point that was made by the noble Lord, Lord Bilimoria, about liquidity? It is all very well to reach a theoretical value of shares, but the value is actually in what people are prepared to pay for them. In small private companies where there is no liquidity, how will you deal with that?
Viscount Younger of Leckie
It remains the case that these are discussions that must take place between the employer and the employee. Again, it is not for the Government to prescribe or give advice in this respect. That is a consistent theme that I have taken.
On the same theme of shares, as raised by my noble friend Lord Forsyth, we recognise that there may not be a market for private company shares and therefore it is important that, where appropriate, a buyback clause will be useful to both the employee and the employer. This is an issue that the noble Lord, Lord Myners, raised as well. We introduced in the other place a power to bring forward the regulations that would govern these buyback clauses in the event that employers were behaving unscrupulously. This would prevent employee shareholders being forced to sell back their shares at an unnaturally low price.
The noble Baroness, Lady Turner of Camden, made an assertion, or perhaps it was an accusation, that the Government want to remove employment status. I reiterate what I mentioned both in Committee and on Report, that this is not about removing rights, it is about creating a new employment status that offers a different set of rights and a mandatory share ownership. The status, I say again, is not compulsory for companies to use, and it will only be suitable for those companies that want to share ownership with their workforce. We must remember that employee shareholders will retain the majority of employment rights, including, for example, automatic unfair dismissal rights and the right to be paid the national minimum wage. We have consistently said that the new status will not suit all people or all companies. This is very much a common theme. However, for those who choose to use it, the employee shareholder status offers more flexibility and allows greater risk- and reward-sharing between people and companies.
My noble friend Lady Wheatcroft and others raised the issue of whether the employee shareholder scheme is open to tax avoidance, an issue that I touched on slightly earlier. It is a key aspect of the policy to allow employee shareholders to share in the success of their employers without paying capital gains tax on at least some of their gains. However, to guard against abuse of the tax exemption, there are several rules that limit the number of shares that can be exempt. For example, the rules will prevent repeated consecutive use or multiple simultaneous use of employee shareholder status to get around the limit. In addition, anybody who controls, alone or with other connected persons, 25% or more of the voting power in the company, will not be able to receive exempt shares. We will not allow people such as spouses or children who are connected to individuals who control 25% or more of the company to benefit from the exemption.
We have listened to the concerns and, as was mentioned earlier, we have acted to ensure that jobseeker’s allowance claimants will not be penalised if they decide not to apply for or accept an employee shareholder job. Together with protections for employees, our announcement about jobseeker’s allowance policy means that no claimant or employee can be forced to accept this status. I thank many noble Lords for their support in this particular respect.
The new employment status gives ambitious, talented individuals with entrepreneurial spirit an opportunity to share in the risks and rewards of being part of their employing company. I want to say something important in these closing stages. I have clearly listened this afternoon and I have heard the strength of feeling in the House towards this particular clause. I ask the House to support the Motion to agree with the Commons’ position that Clause 27 be retained. If the House does not support that Motion, I will ensure that the strength of feeling in the House today is conveyed to my ministerial colleagues.
Growth and Infrastructure Bill
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, I thank my noble friend Lord Flight for raising this matter, and for his general support for the principle of the clause.
I would now like to speak to Amendment 49C. As noble Lords have said, we will have a chance to debate the fuller aspects of the clause under the next amendment. In effect, this amendment calls for up to £25,000 of share value received by employee shareholders to be free of income tax and national insurance contributions. I note my noble friend’s considerable knowledge of this area from his time shadowing Treasury Ministers and from his chairmanship of the Enterprise Investment Scheme Association, but on this occasion his proposals are not in tune with the underlying aims of the policy. The employee shareholder status is not a new tax-advantaged employee share scheme or an investment incentive, although it may be used alongside existing reliefs in these areas.
In practical terms, the cost to the Exchequer of pursuing this amendment would be prohibitive. A tax relief of that sort of magnitude would make it necessary to attach a great many prescriptive rules to ensure that benefits were targeted and to prevent abuse: for example, by businesses using it as a means of transferring taxable income into employee shareholder shares. I acknowledge that my noble friend Lord Forsyth of Drumlean made these points rather eloquently. This would have the effect of introducing considerable complexity to the new status, working against our stated aim of offering a new option that is flexible and accessible to a wide range of companies.
Of course, tax policy has a part to play in this new employment status. We have listened carefully to concerns that the income tax position could be a significant disincentive for some individuals. We recognise that this could be an issue for a very few and have addressed it. It is a long-established fact, and certainly not unique to employee shareholders, that when a person receives shares as part of their employment, they may be liable for income tax and national insurance contributions on those shares. This is a consequence of the normal tax rules and the way in which income gained from employment is taxed. We must also remember that when an employee shareholder sells their shares, gains from the first £50,000 of shares given to an employee shareholder will be free from capital gains tax, which is part of the wider aspects of the scheme.
I informed the House that the Government were considering an option which would allow the first £2,000 of shares to be given to employee shareholders without incurring income tax or national insurance liabilities. The Chancellor announced in his Budget earlier today the decision to proceed with that option. This means that, typically, if an employee shareholder were to receive shares worth £2,000, no income tax or national insurance contributions would be chargeable when they received them. If they received £2,500 worth of shares, any tax would be due on the £500 excess.
The Finance Act contains several measures that will prevent misuse of the employee shareholder employment status.
Viscount Younger of Leckie
If I may, I am about to address some points that my noble friend made concerning the tax status.
For example, we do not want directors to manipulate the new status by making fake jobs for family members, which may have been in the mind of my noble friend Lord Forsyth when he made his earlier comments. We want this employment status to be attractive to a whole range of people. If we allow that no income tax or national insurance contributions are payable on the first £25,000 of shares, we think this will create only a disproportionate tax benefit for higher earners. This is about a new employment status that is open and attractive to a range of prospective users.
My noble friend Lord Forsyth asked a number of questions relating to how different types of shares would be treated and what this meant in tax terms for individuals in employment. When a person agrees to become an employee shareholder, the employer should be able to tell them what type of shares they will receive. The types of shares an employee shareholder receives may vary, as I think my noble friend indicated. First, they could be non-restricted shares. These are shares awarded without any ongoing conditions, limitations or requirements that affect their market value. If an employee shareholder holds non-restricted shares, they are usually in the same position as an external investor in the company.
Secondly, restricted shares are shares awarded with conditions, limitations or requirements attached that reduce their value. For example, an employee shareholder may not be able to sell their shares for a certain period or, if they leave the company, they may not be able to retain their shares. The employer may agree to buy the shares back from the employee shareholder.
Thirdly, forfeitable shares are restricted shares awarded on the basis that within a certain period of time, or on the occurrence of certain events, the employee shareholder may have to forfeit them and in return will receive less than their market value. When the tax is payable on these shares will depend on the type of shares that are offered. As my noble friend Lord Stewartby said, this is a voluntary arrangement, under which the individual will go into an agreement with the employer, and the type and status of the shares will be decided with their agreement. That will then lead, by agreement, to the point when the tax will be payable.
Viscount Younger of Leckie
My noble friend is taking rather a negative view. We need to look at the opportunities that the whole scheme offers. The employee shareholder could decide not to accept any shares or such a role if the situation that my noble friend mentioned applied. It may not suit them; they need to get advice and go into this scheme with their eyes open.
Lord Forsyth of Drumlean
Is my noble friend saying that the scheme will work for restricted stock that is subject to conditions? He seems to be saying that restricted stock will be treated in the same way as tradable shares, to the extent that they can be tradable. Perhaps I should declare an interest in that I have been given shares in the form of restricted stock on the condition that if I left the company or was dismissed the shares would be forfeited. Could conditions that effectively took away people’s employment rights be applied to restricted shares? How would that be defined? If it is just something to be negotiated between the employer and the employee, could an employee not find that he gives away his employment rights for some shares that he would lose if he was sacked?
Viscount Younger of Leckie
The discussions will take place before the employee shareholder goes into an agreement. If they are at all unsure, they have the right not to do so. Different types of shares and share schemes beyond those that I have highlighted today may be applicable. That, as my noble friend said, will remain a matter for discussion between the employer and the employee shareholder.
Lord Forsyth of Drumlean
That is precisely what I am doing. I am seeking clarification on an important point. If someone comes to work for a company that has a scheme involving restricted shares that you would lose if, for example, you were dismissed, how can that person negotiate when they are told, “This is the job and these are the terms”? What is their negotiating position if 100 people have already signed up? If the Minister is correct, does that not drive a coach and horses through the benefit, limited as it is, that applies to the employee?
Viscount Younger of Leckie
That takes me back to the question raised by my noble friend Lady Brinton. If there are too many employee shareholders to make this work, there may indeed be no room for another employee shareholder. I say again: the opportunity is voluntary and the terms are to be agreed between the employer and the employee. That is all that needs to be said. It is exactly why we are not being too prescriptive with this system. We are providing an opportunity for employers to take up this scheme and for employees to share in its risks and rewards.
Scotland Bill
Debate between Lord Forsyth of Drumlean and Viscount Younger of Leckie(12 years, 4 months ago)
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Lord Forsyth of Drumlean
I guess it does, and that is another absurdity but this is what happens when, for political reasons, politicians start mucking around with the powers that relate to Parliaments. The end result is confusion where there should be clarity, and clarity is very important in this area. If there is a case for reducing the speed limit—I think that there is a case for doing so in built-up areas and for increasing it on motorways—it should be done in the United Kingdom as a whole. In all the time that I served as a Scottish Member of Parliament in the other place, nobody ever came to me and argued the case for having a different speed limit in Scotland. People would argue about the regulations that related to where 30 mph speed limits would be but there was no suggestion that there should be differences.
Because I am very constructive when it comes to the Scotland Bill, as my noble and learned friend knows, I am very happy to accept that a decision has been taken on this. However, if you are going to make changes to the law and to the ability to change the law in respect of speeding, drink-driving and so on, the penalties should match the crime, and we are not providing for the Scottish Parliament to be able to produce the whole package. In short, this is a bit of a muddle. I look forward to my noble and learned friend’s answer and to hearing a commitment that he will sort out the muddle in the way that this House is very good at doing.
Viscount Younger of Leckie
My Lords, my name is added to Amendments 47 and 50. However, I should like to focus my thoughts in general on all the amendments in this group, which specifically, following my noble friend the Duke of Montrose, covers the devolvement of drink-driving test thresholds to Scottish Ministers and the decision on speed limits north of the border.
Within the Bill I am broadly supportive of passing decision-making to Scottish Ministers on major issues such as raising taxes. However—and this is where I agree with my noble friend Lord Forsyth of Drumlean —my initial reaction to the proposals for potentially different speed limits and alternative breath-test thresholds on either side of the Scottish border was that they were petty, insignificant and unnecessary. Above all, I felt that any such change north of the border must surely be change for change’s sake, with the Scots just wishing to be different and having an implicit mistrust of the English authorities to set correct limits for both.
I regard us as being one nation for these purposes. In case we had not noticed, there is a seamless border between Scotland and England, so any change would necessarily mean increased bureaucracy, together with, as has already been mentioned, changes in the Highway Code, and, in particular, signpost changes everywhere along the border from Gretna to Coldstream and beyond, leading to increased costs. Above all, it would be confusing for the motorist. It has already been pointed out that if, for example, someone driving north is stopped south of Carlisle and breathalysed, and is then let off because of the limit in England, and he then unfortunately gets caught again when he is stopped at Beattock Summit, he could be over the limit there—assuming there is a lower breath test limit north of the border. The moral of the story, of course, is that one should not drink and drive; but the fact of the matter is that we should keep it simple for motorists and it is a very confusing issue.
However, that was my initial reaction and I have come round to thinking more positively about the potential differences north and south of the border. In so doing, I decided to look at the Irish experience—that is, the differences in road laws north and south of the border. Again, it is a seamless border. There are, first of all, broadly similar speed limits, the major difference being that there are kilometres in the south and miles in the north. The implications for that are that drivers have actually got used to the changes and highway codes have been changed without too much bother. The main thing is that rental companies have had to be aware of the changes and have had to, over time, issue new guidelines. Some of their cars have dual kilometres/miles per hour on their speedometers.
When it comes to the breathalyser tests, there are differences between the Republic and Northern Ireland. At present, Northern Ireland is the same as the rest of the UK, which has a limit of 80 milligrams per 100 millilitres of blood: beyond that, you get caught. In October 2011, the Republic’s threshold was lowered to 50 milligrams per 100 millilitres of blood. In Northern Ireland, there is now talk of changing to the Republic’s levels. It is no bad thing, therefore, if Scotland also goes down this route, given devolved powers.
Why is this? It is because in Scotland, the road casualty rates, some of which inevitably result from drink-driving, are 34 per cent higher per head of population—both for fatalities and for serious injuries. We should bear this in mind. The Royal Society for the Prevention of Accidents fully supports a reduction in breath test limits. It says this is a chance for greater financial benefits for the nation as well as benefits in health and well-being.
Lord Forsyth of Drumlean
I am most grateful to my noble friend, but is he not making an argument for the whole of the United Kingdom? Is not the difference in statistics between Scotland and England, which he has highlighted, an argument about enforcement rather than the level of the limit?
Viscount Younger of Leckie
I take my noble friend’s point, which is a good one that should be discussed. It brings up the point about discussions going on north and south of the border concerning that issue. One point to make is that a recent survey highlighted the fact that 79 per cent of Scots were in favour of lowering the limit.
Finally, as has been mentioned, if Scottish Ministers did decide to change either speed limits or breath test levels north of the border, there need to be certain safeguards in place. For example, if an English driver commits a serious offence in Scotland, it is imperative that a disqualification remains in place when he returns home. There is form on this. In 1998, for example, there was an agreement of co-operation between the Republic of Ireland and 13 member states of the European Union over disqualification. I understand that there is also an agreement between Northern Ireland and Great Britain over such recognition. I think, on balance, that devolution of powers to Scottish Ministers on road safety matters is positive only if—as seems possible—there are safer roads.