Growth and Infrastructure Bill

Nick de Bois Excerpts

Tuesday 23rd April 2013 Commons Chamber

[Ian Murray]

I am delighted to receive the intervention, because it is the Treasury that says that £1 billion will be lost and Lord Deben, a Member with whom the right hon. Gentleman probably shared time in government, who said that perhaps no one will take this up. So it is not we who are saying it but Conservative peers in the other place and the Treasury’s own assessment of what will be lost. Whether someone takes it up or not, the Treasury is saying that there will be £1 billion of lost taxation. Perhaps Ministers in this House might want to go and chat to some of their colleagues in the other place and decide what they are going to do with it.

Critically, there was a hint in the Lords that some kind of deal had been done between the Business Secretary, who incidentally has said nothing on these proposals, and the Treasury. Can the Minister tell the House what that deal is? The public deserve to know what deal has been done between the two senior Government Secretaries of State to push the proposals through. I will take an intervention from the Minister now if he wishes to tell the country what that deal is, but I suspect he will not take up that opportunity.

Let me highlight another comment from the other place last night. The shadow Minister, Lord Adonis, who took the report through the other place yesterday, said:

“Where does this report come from? We all know: it is on the rebound from the Beecroft proposal to do away with certain employment rights in respect of unfair dismissal and instead to substitute a single payment that would have resulted from it. The Business Secretary was not prepared to go along with that. Then, as we have heard from various parts of the House”—

including from the Government side of the House last night in the other place—

“some kind of deal was apparently done between the Chancellor and the Business Secretary to resurrect a version of the Beecroft proposal in return for shares.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1271.]

The House needs to know, before the legislation is passed, what that deal was.

Lord Forsyth emphasised it when he said:

“the Government seem determined just to railroad this through and not deal with the arguments.”—[Official Report, House of Lords, 22 April 2013; Vol. 744, c. 1258.]

Those arguments are not diminished by the amendments that the Government tabled this morning—amendments that were only confirmed at 11.27 this morning. They are scurrying around, trying to find solutions, when the best solution is to consign the policy to the dustbin.

Under the scheme, which creates a third type of employment status, as the Minister mentioned, employers may award employees at least £2,000 in shares in exchange for the employee’s giving up a bundle of employment rights, including ordinary unfair dismissal, the right to a statutory redundancy payment, the right to request flexible working, and the right to training. The Government are determined to pursue the scheme, but the list of concessions that they have produced today, and which they hope will get it through the Lords, is completely inadequate and does not address the fundamental issues of the giving up of employee rights for a few worthless shares.

There were many interventions in the House last week. The Opposition wholeheartedly support employee ownership, but there does not have to be a link between employee ownership and giving up one’s employment rights. Many Government Back Benchers who are in their place this afternoon made the point about how wonderful employee ownership was, but the fundamental point is that employee ownership does not have to be increased by giving up fundamental rights at work.

Let me go through some of the concessions that have been presented to the House today. First, there is a provision that the employee cannot accept the offer within seven days of it being made. How that would work in practice is completely unclear. An employer remains free to refuse to offer the job to a prospective employee who does not want to take up employee shareholder status. That is a critical point about whether it is voluntary. With the employment market as depressed as it is, why would an employee want to turn this down? People are desperate to get back into work. That is why the proposal cannot be seen as voluntary. Why would an employer not just say that this has to be accepted or the job offer will be withdrawn? Perhaps the job will be offered to a number of candidates, and the candidate who accepts the shares for rights proposal will ultimately get it.

[Nick de Bois (Enfield North) (Con)]

May I challenge the hon. Gentleman to think about his premise? He said earlier that these are worthless shares. I do not think that any business or entrepreneur in the country who takes such a risk would believe that shares are worthless. That is the big difference on the Government Benches. Does he agree that the fact that the Opposition think the value of the shares is zero colours their judgment of how an employee who wants to take a risk and an opportunity would see great value in having a stake in a business?

[Ian Murray]

There is a misconception among Government Members that no Opposition Member has run their own business. Well, I have run several businesses before I came into the House. At the start, of course the value of shares was high, because we were investing in the businesses, but that is not always the case. Ultimately, when businesses shed staff or employees have to leave, shares will be worth less. That is a fundamental principle of business. When I come on to the concessions that the Government have put together, it will be seen that that is absolutely right.

[Nick de Bois]

The hon. Gentleman is talking about the end of a business. When one starts a business—as I am sure he has done, given what he just said—it is to achieve success and growth. That is when the shares offer their greatest opportunity. They will be offered for no cash in return for a stake and the potential of profit later, with a tax-free advantage. It really is a win-win.

[Ian Murray]

I have a lot of respect for the hon. Gentleman, who undoubtedly has a lot of business experience, but he clearly has not read the legislation or understood what it is trying to achieve here. He is right that when the shares are being given out, they will have a high value. But at the very time that employees need to cash in those shares because, for example, they have given up the right to redundancy, their value will be lower than when they were first given, or they will be worthless. The residual value of the shares will be far lower when an employee is effectively being sacked than it was when the employee was being taken on. That is why some of the concessions have been made.

Let me come to the written statement that the Minister has suggested to set out the details of the shares being offered, including whether they are voting or non-voting shares, whether they carry a dividend, whether they carry a right to a share in a company’s assets if it is wound up, whether pre-emption rights are excluded, and details of drag-along and tag-along rights. Most employees will not understand the implications of this information, and there is nothing to prevent employers from issuing pages of gobbledygook about the shares that buries the information somewhere within.

I am struck by the provision about winding up, which is specifically mentioned in the concessions. Surely this is the crux of the matter. [Interruption.] Members are chuntering away, but if they wish to intervene, they may do so. How can it be right to give up the right to a redundancy payment at the same time as the shares may not be worth anything at winding up. The term “winding up” is used in the Government’s amendment to the proposals. Shareholders tend to get nothing in the winding up of any business after the creditors are taken into account. Why would any employee want to do this? We end up with a situation where, at a time when an employee would want to cash in the shares, the company is in real financial trouble and the shares are worth far less than the initial value or nothing at all.

[Nick de Bois]

The short answer is that if one takes shares, one takes a risk. The difference is that employees are not being asked to part with a cash investment up front.

[Ian Murray]

That might be the case, but one does not have to give up one’s fundamental worker’s rights to take the risk in shares in businesses. Many employees take shares in businesses, but they do not give up the rights to redundancy, to request flexible working, to training and to unfair dismissal and maternity rights. Last week, the hon. Gentleman made an impassioned speech about his running of businesses and the fact that his employees are always at the forefront of his mind. The vast majority of those in this country who start a business have employees at the forefront of their minds. But relationships do break down and businesses do run into trouble. I agree with him to a certain extent, but missing from the jigsaw is the fact that fundamental rights at work still have to be given up in order to take on those shares. He fails to recognise that that is part of the overall equation.

Let us examine the issue of tax avoidance that my hon. Friend the shadow Business Secretary mentioned in the House last week. The Treasury says—it is a Treasury document—that this will cost £1 billion, but the true cost may be more than that, as my hon. Friend said. As the Treasury’s December 2012 policy costing document says,

“It is hard to predict how quickly the increased scope for tax planning will be exploited.”

Let me examine this:

“increased scope for tax planning will be exploited.”

That sounds to me like tax avoidance and it was picked up by Paul Johnson, the director of the Institute for Fiscal Studies, who said:

“just as government ministers are falling over themselves to condemn such behaviour”—

tax avoidance—

“that same government is trumpeting a new tax policy that looks like it will foster a whole new avoidance industry.”

The Treasury document, by using the terminology

“increased scope for tax planning will be exploited”,

emphasises what Paul Johnson has said.

[Ian Murray]

The hon. Gentleman makes a valuable point. He voted with the Opposition last week, on which he should be commended. The other issue around the concept of dilution of shares is that when new investment comes into a business, shares can be diluted. There is no provision for employees who are shareholders to be informed of that. Assets can be transferred out of businesses and there is nothing to stop employers, when they wish to make large scale redundancies of employee owners in the business, diluting the shares before they do so.

[Nick de Bois]

The hon. Gentleman will remember that, under his Government, the Companies Act 2006 had some clear safeguards for minority shareholders, which specifically protect their interests and allow resort to court if minority shareholdings are unfairly diluted.

[Ian Murray]

We are back to the same point from the hon. Gentleman. He still refuses to recognise the equation here. That may all be correct, but at the same time fundamental rights still have to be given up. Indeed, those safeguards in the 2006 Act have been wrapped around by many companies in terms of the dilution of share ownership.