My Lords, in my eight years in the House I have never witnessed a government policy with less support not only in Parliament but within the Government themselves. We greatly admire the stoicism of the noble Viscount, who will read out his brief in a moment, but it is no secret that his own Secretary of State, Vince Cable, does not support this clause. This is what he said when he vetoed the original Beecroft plan to scrap unfair dismissal rights:
“Britain has already got a very flexible, co-operative labour force. We don’t need to scare the wits out of workers with threats to dismiss them. It’s completely the wrong approach”.
Most Conservative and Lib Dem Back-Benchers clearly think that it is the wrong approach, too. Only two government Back-Benchers have supported this clause at any stage in our debates, and they have been not only outnumbered on their own Benches but massively outgunned, not least by the powerful speeches made this afternoon by the noble Baroness, Lady Brinton, the noble Lords, Lord Forsyth, Lord King, and Lord Vinson, and the noble Baroness, Lady Wheatcroft.
To remove this clause today would be an act of mercy to the Government, let alone to the employees adversely affected by it. Justin King, the chief executive of Sainsbury’s, who was on the Prime Minister’s business advisory group, said that trading basic employment rights for shares was,
“not what we should be doing”.
He went on to say:
“What do you think the population at large will think of businesses that want to trade employment rights for money? … Our agenda … should be making employing people easier and less costly”.
That is absolutely right.
We are talking here about the right to statutory redundancy pay, the right not to be dismissed unfairly, the right for parents and other carers to request flexible working, and the right to request training. The idea that depriving employees of these basic rights is somehow going to boost growth is not supported by a single employer I have met, let alone employee. Out of the 219 responses to the government consultation, only five welcomed the idea. The noble Lord, Lord Deben, summed up the mood of the business community and the House when he told us in Committee:
“I cannot imagine any circumstances whatever in which this would be of any use to any business that I have ever come across in my entire life”.—[Official Report, 6/2/13; col. 293.]
He might have added that protection against unfair dismissal and the restriction on contracting out from basic employment rights were introduced by Conservative Governments in the 1970s and 1980s.
Throughout our debates, I have emphasised that we on this side strongly support wider employee share ownership, and we backed proposals to that effect in the Nuttall report, published only eight months ago. However, that is entirely different from trading shares for basic rights in what is generally an unequal employment relationship, which is the very reason why employment rights exist in the first place and why they have been built up by Governments of all parties over many decades.
I stress that the Nuttall review did not so much as mention trading shares for rights, and the Minister has been quite unable to explain to the House why, if this proposal is such a good idea, it was not even considered, let alone endorsed, by the most comprehensive review of employee share ownership in recent years. Meanwhile, the Employee Ownership Association has said:
“There is no need to dilute the rights of workers in order to grow employee ownership”.
However, let me put these arguments of principle aside for a moment. The policy is internally flawed in two key respects. First, its key rationale is that it will promote growth by reducing employment law red tape for companies. In fact, as the Law Society argues cogently, it will create more red tape, not less, because it is bound to lead to costly litigation. In particular, it will lead to a rash of claims of discrimination because discrimination will be the only avenue for aggrieved employees to pursue once they have no rights to redundancy pay or unfair dismissal.
The second respect in which this proposal is internally flawed is that the Government claim—the noble Viscount repeated the claim in the previous debate—that this is an entirely voluntary new employment status, with no coercion on anyone to accept it. The problem is that on any fair assessment this claim is simply not true. There is no requirement in the Bill for employers to provide independent advice to those being offered these shares-for-rights jobs. It is therefore likely that individuals, particularly the more vulnerable and low paid, will not be properly aware, if they are aware at all, of the rights they are forgoing in return for shares worth as little as £2,000 at the time they are issued—shares that could easily be worthless by the time they come to sell them. That is why, in Committee, we supported amendments requiring independent advice to be made available before individuals sign shares-for-rights contracts, but the Government refused to accept those amendments. This being the case, Clause 27 stands condemned by the Equality and Human Rights Commission, which says in its advice to your Lordships:
“A failure to include effective safeguards in the proposals would make it strongly arguable that the proposals indirectly discriminate against those less likely to be able to make a properly informed or truly voluntary decision, for example, people whose first language is not English, those with learning disabilities, or young workers”.
Worse still is the position of individuals on unemployment benefits, who far from being given a voluntary choice about accepting no-rights jobs are being told by the Government that they stand to lose their income if they do not do so. In order to make it look as if they were sympathetic to these concerns, Ministers said that they would amend the guidance to DWP decision-makers in cases of appeal against loss
of benefits so that decisions were taken on a reasonable basis. Despite months of badgering the noble Viscount and his department, we did not even see this revised DWP guidance until last week. I am very grateful to him for finally making it available to us. Now that we have it, I can see why the noble Viscount thought concealment the better part of valour, as the noble Lord, Lord Pannick, said so eloquently, for it states in terms:
“Employee shareholder vacancies should on the whole be treated in the same way as any other vacancy”.
In other words, if the jobseeker does not take a no-rights job, they are likely to lose their benefits. I cannot see what is voluntary about that transaction.
As Paul Callaghan, a partner of the respected legal firm, Taylor Wessing, puts it,
“shares-for-rights contracts will be optional to the extent that eating and drinking are optional”.
As if all I have said so far is not enough, there is another major and completely unacceptable aspect of this shares-for-rights proposal. The independent Office for Budget Responsibility has reported that it opens up a £1 billion tax avoidance loophole. During Committee, the noble Baroness, Lady Brinton, quoted the coalition agreement, which says that the Government will,
“make every effort to tackle tax avoidance”—
and,
“will seek ways of taxing non-business capital gains at rates similar or close to those applied to income”,
yet Clause 27 does precisely the opposite.
In his letter to me last week, the Minister confirmed that the first £50,000 of shares given to an employee shareholder will be free from capital gains tax when they are sold. It is for this reason that the Office for Budget Responsibility estimates that the scheme will cost the Exchequer £1 billion a year when it is mature. At this point, we enter the world of the surreal.
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