Michael Fallon
Main Page: Michael Fallon (Conservative - Sevenoaks)Growth and Infrastructure Bill
Michael Fallon Excerpts
The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)
I beg to move, That this House disagrees with Lords amendment 25.
Back in October, the Government introduced a Bill to this House that contained a number of important growth measures designed to help stimulate the economy. I am very pleased to report that both Houses of Parliament have given the Bill the priority it deserves, and that six months after its introduction both Houses have completed their consideration. We must now reach agreement with the other place on the final version of the Bill.
Let me explain that the Government agree with 38 of the 40 amendments that have been made. My right hon. Friend the Secretary of State for Communities and Local Government will address those in the second group of amendments for debate. It is right that we set out our reasons for our disagreement with the other place in two important respects.
The Government do not support amendment 25, which seeks to remove clause 27—a clause that this House supported and that would establish the new employment status of employee shareholder. I urge the House to confirm its view that this imaginative proposal should continue to be made available and clause 27 should be retained.
Clause 27 establishes a new employment status in our labour market—the employee shareholder—in addition to the existing categories of worker and employee. Employee shareholders will have more employment rights than workers but fewer rights than employees. Importantly, employee shareholders will be given at least £2,000 of shares in the company they work for, or in its parent company. The first £2,000 of value will not attract income tax or national insurance contributions, and the first £50,000 of shares will not be subject to capital gains tax.
British companies are competing in a global race to increase their competitiveness and create wealth. What is at stake here is choice and a new status that companies can use to give themselves a competitive edge and more flexibility in deciding how to structure their work force. By combining share ownership and favourable tax treatment—with appropriate steps to prevent any tax avoidance—we are giving companies, especially young companies, a tool that may tip the balance in their favour as they seek to attract high-calibre individuals who can have a disproportionately positive impact on how the company performs. That is why the Government want to create the new employment status—to promote enterprise and aspiration.
Much has been said about the new employee shareholder status. Throughout the scrutiny in this House, I stressed that we do not want people coerced into this new type of status. That is why the Government chose to add protections to the status on Report. We added protections for existing employees by creating a new unfair dismissal right and by inserting the right not to be subjected to any detriment if they turn down an employee shareholder contract. Those protections are important. They allow existing employees, if offered an employee shareholder contract, to say no, in the knowledge that the law will protect their decision.
The Government have always been clear that this measure is voluntary for both individuals and companies to use if it suits their circumstances or business needs. For people on jobseeker’s allowance, our priority is to minimise periods of unemployment by helping them to move into work as soon as possible. During proceedings in this House, I listened carefully to concerns raised by, among others, my right hon. Friend the Member for Hazel Grove (Andrew Stunell), who is in his place today. In response to the concerns he expressed in Committee, I agreed that guidance to decision makers in jobcentres would make it clear that an individual should not be mandated if there were good reasons for refusing an employee shareholder offer. However, the other place was unconvinced that this employment status would be truly voluntary for jobseeker’s allowance claimants if there was the possibility—however remote—that a claimant could lose their JSA if they turned down an employee shareholder job.
I want to make it absolutely clear that this new employment status is voluntary. That is why the Government have looked at all this again in the light of comments and speeches by noble Lords. We have decided now to remove any remaining ambiguity, which I hope will reassure both this House and the other place. I can tell the House that as a result of considering the policy further we have decided that jobcentre advisers will not be able to mandate jobseekers to apply for employee shareholder positions. The Government will amend the guidance for DWP jobcentre advisers to state explicitly that a jobseeker cannot be mandated to apply for an employee shareholder job. Draft guidance will shortly be placed in the Library.
Andrew Stunell (Hazel Grove) (LD)
I thank my right hon. Friend for giving way and, in particular, for having listened carefully to what was said in this House and in the other place. Will he say a little more about the guidance that will be provided, the timetable and the implementation? Can he give us an assurance that it will be in place before the Bill receives Royal Assent and comes into force?
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.
Mr Chuka Umunna (Streatham) (Lab)
The Opposition agree with Lords amendment 25, which seeks to remove the part of the Bill that provides for the new status to which the Minister referred.
Let me start by making an observation. We are debating the Bill the day before many in the country will pause to observe the funeral of the late Baroness Thatcher. Coincidentally, in supporting the Lords amendment to dump the Government’s proposal, we find ourselves in the extraordinary position of being on the same side of the fence as at least four of her former Ministers: Lord Lawson, Lord Forsyth, Lord Deben and Lord King. The reason for this unusual state of affairs is simple. Notwithstanding the admittedly notable concession that the Minister has just given, this is an ill-thought-out and bad idea, and that is why there is strong cross-party opposition. Lord Forsyth put it well in the Lords when he said that the proposal
“has all the trappings of something that was thought up by someone in the bath”.—[Official Report, House of Lords, 20 March 2013; Vol. 744, c. 614.]
I have to say that I agree with Lord Forsyth on another matter, too. I cannot understand why my opposite number, the Secretary of State for Business, Innovation and Skills, the right hon. Member for Twickenham (Vince Cable), who I note is not here today, is going along with this. The Business Secretary engaged in some considerable media in respect of the Beecroft proposals, and said how outrageous they would be. I am, of course, aware that the Minister perhaps has a different view. As Lord Forsyth said, at least Beecroft did not take away entitlement to redundancy payments. This is worse than Beecroft because it does.
There are a number of reasons why we support the Lords amendment. They were all mentioned in the other place and we wholeheartedly agree with them. First, this is supposed to be a “growth” Bill. No evidence whatever appears to have been adduced by the Government to show how this measure would boost growth. The attitude of businesses, at its most generous, is divided; at its worst, it is overwhelmingly opposed to the measure. In the latest published survey of 700 companies by Barclays Corporate, which was published this week, the proposal appears to find favour with just 25% of respondents. In the Government’s own consultation, only five businesses out of the 200 responses received showed any interest in taking up the scheme.
Secondly, why connect employee ownership, for which there is widespread support in all parts of the House, with giving up rights to not be unfairly dismissed, redundancy pay, flexible working and time off for training? No coherent answer has been provided by the Government during the Bill’s passage through this House or the House of Lords. In fact, as the Conservative Baroness, Lady Wheatcroft, said, their proposal simply risks giving employee ownership a bad name. After all, if businesses with employee shareholders are looking to carry out a redundancy programme, who are they likely to let go first?
Mark Lazarowicz
Thank you, Mr Speaker. I shall end by saying that I hope the House will not support the Government’s proposals today.
Michael Fallon
With the leave of the House, I should like briefly to respond. I am afraid that we have had a fairly predictable debate today. We have heard the voices of the employment lawyers on the Opposition Benches, and the voices of entrepreneurs on this side of the House. I have made it absolutely clear that the proposed status will be entirely voluntary and optional, and I have introduced a further change today to make it absolutely clear that those who are on jobseeker’s allowance will be fully protected. Nobody has to take up this status. Nobody can be harassed or bullied into taking it up, but there are plenty of businesses that are ready and willing to do so.
I should like to finish by citing Miss Becky McKinlay, who said that she would have welcomed such a scheme when she set up her company six years ago, because she could not afford to outbid her peers on wages. Her company is called Ambition, and we should be ambitious—