Employee Share Ownership Schemes

Debate between Lucy Frazer and George Howarth

Tuesday 6th September 2022 Westminster Hall

[The Financial Secretary to the Treasury (Lucy Frazer)]

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate the right hon. Member for Knowsley (Sir George Howarth) on securing today’s important debate. I have spoken to Members across the House, and there are many supporters who know the importance of this area. I know that the issue commands cross-party support, as we can see today. I, too, want employees to share in the success of the companies they work for. I want businesses to reward and retain talent, driving even more success.

I believe that through taxation policy, including reliefs, we can drive innovation. The partnership between business, employees and Government, which the right hon. Gentleman talked about, is important. A vital part of that is the support that the Government provide to employee share ownership through tax reliefs, which were recorded at £760 million of income tax and national insurance contribution relief in the financial year ending 2021.

There are four tax-advantaged share schemes, with millions of instances of awards or share options benefiting employees every year. The right hon. Member talked about SIP and save-as-you-earn, so I will mention those first. They are designed for companies to offer a tax-advantaged option or shares to all employees on the same basis. Save-as-you-earn, which has the largest aggregate value of all the schemes, is designed to help lower earners to save, by deducting salary directly at source, and adding it to a special savings account for the scheme. At the end of their savings contract, employees can use the funds to purchase shares in their employer.

Our other all-employee scheme is the share incentive plan, which was introduced in 2000, 20 years after the introduction of SAYE. It is targeted at companies that wish to help their employees to purchase shares directly in their company, or even receive them as awards. That particularly helps low to mid-range earners.

Although the right hon. Member talked about SIP and save-as-you-earn, which rightly deserve attention of their own, there are other schemes to help companies with their growth. In turn, such schemes help the growth of the wider UK economy, so it is right that we consider the wider share schemes landscape, too. Two distinct schemes give companies choices over which employees they offer tax-advantaged options to, with specific criteria and performance conditions that can be tailored to the company. The company share option plan introduced in 1984 remains popular among many companies of all sizes, which use it to motivate and reward junior and middle management. Lastly, we have the enterprise management initiative. Unlike the other three schemes, EMI is specifically targeted at small and medium-sized enterprises, with the objective of helping them to recruit and retain key employees by rewarding them with highly tax-advantaged share options with a value of up to £250,000 per employee, which can be offered at a discount.

The schemes give companies additional ways to incentivise and reward employees for their hard work by helping them to offer committed employees a direct stake in a company. As the right hon. Member said, that helps firms to achieve a more engaged and motivated workforce by aligning employer and employee interests in the growth of businesses and motivating hard work from employees, who can benefit from their input with a tax-advantaged output, helping to make a company a more attractive place to work by offering an appealing and unique remuneration package. Further, it encourages loyalty to a company among employees, fostering an environment in which the company can increase its productivity and achieve higher and faster growth compared with companies with a less engaged workforce. Lastly, the scheme can help with wider social effects, too, by encouraging savings and investing habits. In turn, it can support better financial planning on an individual level.

The right hon. Member raised an important point about the length of the investment term. To achieve the objective of incentivising employees to stay with a company as it grows, one of the SIP scheme’s rules is that the tax advantages are available on shares awarded only once a certain period of time has elapsed. That encourages employees to commit to their employer and to put hard work into the company to ensure that it succeeds, and the tax relief enhances the reward that they can gain from maximising the company’s success. Although partial tax advantages are possible for an employee after three years, full tax advantages for SIP are enabled at the five-year mark. Unlike the other schemes, SIP enables a direct purchase of shares in the company rather than other options, and the five-year holding for the full income tax and national insurance exemption is intended to encourage employees to remain invested in their employer.

[Sir George Howarth]

Will the Minister give way?

[Lucy Frazer]

If I could just continue the point.

[Sir George Howarth]

I wanted to intervene on a point that the Minister has already made.

[Lucy Frazer]

I appreciate the points that the right hon. Member has made. Stakeholders and employees may not otherwise intend to remain with their current employer for five years, which is why the tax relief is designed to encourage a long-term commitment, but I appreciate the suggestion of a one-year SAYE and less regular contributions.

[Lucy Frazer]

I thank both my hon. Friend and the right hon. Member for Knowsley for their interventions. I was going to say that if evidence could be presented of the impact of that on people taking up the scheme, I know that the Treasury would be very interested in looking at that. As my hon. Friend said, it is important that the schemes are as simple as possible, and I would welcome any suggestions on that point.

With its current restrictions, SIP remains popular. We see people making use of the greatly beneficial tax treatment, with a total value of £780 million in shares purchased or awarded under a SIP scheme in the financial year 2020-2021. We continue to evaluate the schemes to make sure that they are incentivising the behaviours that I have outlined. We keep these important and advantageous schemes under review to make sure that they provide value for money for the taxpayer, support the wider aims of the economy and help employers to drive commercial success.

We launched a review at Budget 2020 to ensure that the EMI provides support for high-growth companies to recruit and retain the best talent so that they can scale up effectively, and to examine whether more companies should be able to access the scheme. At the spring statement, the Government concluded that the current EMI scheme remains effective and appropriately targeted. None the less, the scope of the review was expanded to consider whether the company share option plan should be reformed to support companies as they grow beyond the scope of the specifically targeted EMI. I know that these companies might want to make use of other discretionary schemes, such as the CSOP. While our inclination is to support those companies in doing so, Members will understand that we want to build the evidence base before committing resources, which is why we have expanded our review to include CSOP.

As part of the Government’s duties to evaluate tax reliefs and their value for money on an ongoing basis, we are currently reviewing the broader share scheme landscape. We will keep these important and advantageous schemes under review.

[Sir George Howarth]

I made the point that it would be better if the Treasury carried out its own consultation exercise, rather than asking organisations to bring it forward. The Minister can reflect on that subsequently—I do not want her to answer it now, but just to take it into account.

[Lucy Frazer]

As I mentioned, the Treasury keeps these schemes under review, but of course external evidence is always welcome. We want to ensure that these schemes support the wider aims of the economy and help employers to drive commercial success. We always welcome any evidence that can be brought forward.

In closing, I reiterate that these schemes have an important place in the toolbox of taxation policies. They will help us to drive productivity—the only way to sustainably raise living standards—while fuelling economic growth.

Question put and agreed to.

Investigatory Powers Bill

Debate between Lucy Frazer and George Howarth

Report: 1st sitting: House of Commons
Monday 6th June 2016 Commons Chamber

[Lucy Frazer]

Privacy is the right to be left alone. It was once proclaimed to be the most comprehensive of rights, and the right most valued by civilised men, which is why the privacy provisions in the Bill are important. There are many such provisions interweaved in the Bill. To give three important examples, targeted and bulk inception can take place only in the interests of national security, of tackling serious crime and of the economic wellbeing of the UK. It can take place only with judicial authorisation, and communications data—who, where, when—obtained from service providers have to be justified on the basis of a necessary and proportionate test. The relevant clauses all ensure that any interference with privacy is kept to a minimum.

I am pleased to have served on the Bill Committee, where the issue of privacy was raised with some force by the hon. and learned Member for Holborn and St Pancras (Keir Starmer). I am pleased that as a result of the points that he and other Members made the Bill will be amended with an overarching clause on privacy to further protect and ensure the privacy of individuals. As my right hon. Friend the Member for Chelmsford (Sir Simon Burns) said, new clause 5 provides for the public authority to have regard to the question of whether the action can be reasonably achieved by “less intrusive means”. It also provides a new requirement for the consideration of the public interest in the protection of privacy. New clause 6 provides for an overarching civil liability, adding to the extensive criminal penalties in the Bill.

Those safeguards strike the right balance between privacy and scrutiny. As the hon. and learned Member for Holborn and St Pancras said, safety, security and privacy are not an either/or. That balance has been recognised in Europe, where the ECHR provides under article 8 respect for private and family life and also states that interference by a public authority is legitimate in some circumstances—in fact, the very circumstances outlined in the Bill, including the interests of national security, public safety, the economic wellbeing of the country and the prevention of crime and disorder.

The same balance has been recognised by the UN. In 2014, the UN High Commissioner for Human Rights stated:

“Where there is a legitimate aim and appropriate safeguards are in place, a State might be allowed to engage in quite intrusive surveillance”

if

“it is both necessary and proportionate”.

That balance is recognised by the public. A TNS BMRB poll in 2014 stated that 71% of respondents prioritised the reduction of the threat posed by terrorists, even if that eroded people’s right to privacy. The Bill seeks to ensure that the balance is right, and in enacting it we ought to remember that interference with privacy is often too much until it is too little.

[Mr George Howarth]

It is a pleasure to follow the hon. and learned Member for South East Cambridgeshire (Lucy Frazer). She took the opportunity to highlight the big principles, and showed how they are included in UN documents and the ECHR. It is useful to be reminded of that.

I speak as a member of the Intelligence and Security Committee, and support the amendments and new clauses tabled by the right hon. and learned Member for Beaconsfield (Mr Grieve) and other members of the Committee, including me. I will not read them all out, because he dealt with them comprehensively. However, I wish to make some points about a couple of our proposals. Before doing so, however, I want to refer to the report that the ISC produced in the last Parliament after taking evidence on the provisions in the draft Bill. My right hon. Friend the Member for Slough (Fiona Mactaggart) and I both served on that Committee. I want to highlight two things in that report. First—and the right hon. and learned Member for Beaconsfield covered this—the overriding principle of privacy, which the hon. and learned Member for South East Cambridgeshire discussed, had to be made clearer in the Bill, and set out as unambiguously as possible.

Secondly, the right hon. and learned Member for Beaconsfield raised the issue of penalties. The measure does not exactly conform to what we wanted. We were concerned that the legislation was not consolidated into one measure. I shall deal with that more fully in a moment. Thirdly—if I do not take too much time dealing with the first and second concerns—I shall come on to the debate about judicial involvement in oversight. I hope to say a brief word about that.

I welcome new clause 5, which is helpful and goes much, if not all, of the way in meeting many concerns expressed by our Committee and by other parliamentary Committees, including Select Committees that have looked at the issue. However, in amendment 14—I know the Minister is going to refer to this, so I am not going to make a hard and fast principle out of it—we attempt to put privacy at the forefront of the Bill. If the Minister has found another way of doing that that would satisfy me I would be very pleased, but having read the Bill carefully, I do not think that there are sufficient safeguards to make it clear that that is the case.

The right hon. and learned Member for Beaconsfield referred to new clause 4, and was rightly exercised by the issue of penalties. I want to approach that issue from a slightly different direction. The Bill relies on existing legislation, including the Data Protection Act 1998 for which, if memory serves, I had ministerial responsibility. No apologies there—I think that the measure has served us quite well, although there might be other legislation for which I would apologise, but I am not going to say what it is. The Bill also relies on the Wireless and Telegraphy Act 2006, the Computer Misuse Act 1990, common law, as the right hon. and learned Member for Beaconsfield said, and, finally, misfeasance in public office. It is important that we have more information about penalties because, with such a sprawling collection of existing legislation, if someone breaks the provisions in any of those measures there should be clear and unambiguous penalties. I think that the Minister is going to address that matter shortly.

New clause 2 was tabled by the right hon. and learned Member for Beaconsfield, other members of the ISC and me. The right hon. and learned Gentleman made the point—nobody seems to have noted it, including the hon. and learned Member for Edinburgh South West (Joanna Cherry)—that a commissioner’s functions are not in any sense judicial. I am not going to argue the case fully at the moment, but I could envisage constructing a system where the process is more administrative—indeed, it is an administrative process—so the skills needed to operate it do not necessarily need to be judicial.