My noble friend Lord Forsyth makes a fair point. If tax is to apply, it is difficult to determine how the value of the shares in question is to be assessed, given that they may have certain characteristics. However, I will turn that point on its head, in that it is an argument for there being no tax bill at all because the problem goes away if there is none. My basic point is that common sense states that no one will be much interested in a deal whereby you give up your employment rights for just £2,500 of equity. There should be potential for much greater gain. Something like seven out of 10 smaller businesses in this country tend to fail as a result of taxation being too high and the public sector too large. The situation is not like that in Hong Kong, which is much more successful.
The equity element would be of high risk for people in SMEs. I repeat my point: it is not a question of the Government losing revenue; they will not get any revenue under the clause as it stands because not many people will take advantage of it. Therefore, the Government will not lose any revenue. If they believe in the principle, which I believe in very strongly, there has to be an attractive risk/reward ratio. To my mind, one way or the other, that requires the value of shares on which there is no tax charge to be more than £2,500, although my figures are essentially for illustration.
4.15 pm
I repeat that I am disappointed that this House is overly negative on something that I think should be given a try. It has some powerful arguments in its favour but, if it is to work, there needs to be a sensible number of shares that is worth having and is not subject to a tax charge. People are thinking about this in the wrong way. It is not just a question of the principle. If you are a youngish man or woman granted, say, just £10,000 of shares and you have to find £5,000 in order to take them up, that is a lot of money. You will not have that sitting around in the bank; you will have to borrow it against an asset, but a bank would
not lend you the money because it is too high a risk. Even if you find someone who will lend you the money, you run the risk of the asset you borrow the money for, sadly, becoming valueless. Therefore, it is not a particularly attractive deal.
That is the point of principle but, going back to the first issue, I have looked at the variance of shares and how their value might be assessed, and it is a bit like dying when you own shares in an unlisted company. They are quite hard to value, although it is possible to do so. However, it is much easier if the problem does not exist in the first place.
This amendment is intended to urge the Government to rethink, late in the day though it is with the announcement having been made in the Budget today, because the thinking is in the box whereas it should be out of the box as regards the tax issue. I beg leave to withdraw the amendment.