My Lords, the noble Viscount has been a Minister for a short time only, but I think I speak for the whole House in recommending that he be promoted to an earldom for services to masochism. We have now debated this proposal for twice as long as the House of Commons saw fit to devote to it last week. In the hours of debate in this House, there has been one Member only, besides the Minister, who has wholeheartedly supported this proposal, and we pay great tribute to him: the noble Lord, Lord Flight. Even he sounded a note of equivocation today, saying that he hoped that the many problems that there were still with the scheme could be “ironed out” while it was being implemented. This is not good advice to legislators on how we should conduct our business.
However, I am grateful to, or perhaps sorry for, the noble Lord, Lord Flight—because it weakened his case—that he did not repeat the argument that he used last time, which was that we did not need worry about the £1 billion of potentially lost tax revenue, to which the noble Baroness referred. He said:
“The Treasury will therefore not lose tax revenue as a result of the tax arrangements; it will merely not get as much as it might otherwise get”.—[Official Report, 20/3/13; col. 622.]
I am sure that is hugely reassuring to HMRC and to those of us who are loyal taxpayers and who do not need to worry about the fact that there is no money to pay for anything, because it is simply revenue that the Treasury might otherwise not have got.
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When we debated this proposal on Report, the noble Lord, Lord Forsyth, said:
“I am surprised that this clause has survived so long. The scheme is ill thought through, confused and muddled”.—[Official Report, 20/3/13; col. 597.]
If the House of Lords exists for any purpose, it is surely to see that legislative schemes that are ill thought through, confused and muddled are improved and
preferably removed. We have done neither in respect of this proposal so far. There is the issue with which we all grapple when legislation returns from the House of Commons as to what our position is in respect of it.
I need to make clear, particularly to noble Lords who have not been following the labyrinthine course of this legislation over recent months, that this proposal was not in any party’s manifesto. It was not in the Tory or Lib Dem manifestos. It was not in the coalition agreement. It was not in any report on wider share ownership or employment rights in any recent period. The Nutall report, which was exhaustive on the extension of employment rights and was published six months before this proposal saw the light of day, did not even so much as discuss it, so frivolous would it have been regarded by the eminent advisers to the Nutall review.
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, 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.
There should be an independent, judge-led inquiry into the terms of the deal between the Chancellor and the Business Secretary. The House needs to know and evidence should be taken in public as to precisely what was said and why our good friends on the Lib Dem Benches are so loyally supporting a proposal that appears to stand against everything that all of them came into politics to achieve. I look at them from here. I do not think that any of them came into politics to remove basic, fundamental employment rights in return for a mess of potage, which is what this proposal before the House is. When we last debated this, to my great surprise the Lib Dems almost entirely went into the Lobby with Government, apart from the noble Baroness who spoke earlier and who came into the Lobby with us. I hope that this time they may have the courage of their convictions and come into the Lobby with us.
The Minister for Employment in the House of Commons used three arguments to support this plan that have all disintegrated in the course of the debate this afternoon. First, he said that the new employment status would be “absolutely voluntary”. There is no “absolute voluntarism” when the power relationship is so unequal and there is no right to independent advice either on the nature of the contract on the table or on the rights that are being forgone. I hear overwhelming support for the idea that there should be independent, legal and financial advice available to anybody who might be faced with signing a contract of this kind, before they are obliged to enter into it. I hope that the noble Viscount will take this support back to his colleagues in the Cabinet. In all parts of the House, there has been no movement on that issue in the course of our deliberations.
When we last debated this, the noble Lord, Lord King, said:
“The power is with the employer at a time when many young people are finding it hard to get jobs. In no way is it a fair balance to say, ‘You have an impartial opportunity to decide’. I just
wonder what will happen to the poor job applicant who, when he is told what the terms are, says, ‘I will now go and consult my adviser’ … I know exactly what the employer will say—‘Well, do you want the job or don’t you?’”—[Official Report, 20/3/13; col. 611.]
That is precisely the situation.
Secondly, we have been told that this is mainly an incentive for small start-up companies, particularly in the high-tech sector. In the House of Commons last week, Michael Fallon said that it would apply in particular to younger companies at the beginning of their lives that,
“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”.—[Official Report, Commons, 16/4/13; col. 176.]
The Bill does not say anything about that. It does not have any such restriction. It is of general application. If the intention is that it should apply only to a very limited extent, surely it is our duty to see that the legislation states that. It does not state that, and part of the reason—I latch on to the remark of the noble Lord, Lord Forsyth—is that it would be quite difficult in law to specify how it could apply to only a certain category of companies to which the Government intended that it should apply, and not to others. They need to take that back and consider it further.
The third argument is that the business community wants to see this change. Having read the Office for Budget Responsibility’s report, I have no doubt that quite a number of company employees might find the tax status of these shares attractive. We should remember that shares up to a valuation of £50,000 will be free of capital gains tax. If the legislation is passed, I can well understand that this will prove highly attractive to tax planners. Many people may quickly transfer their employment status in order to take advantage of it. However, the idea that there are large numbers of companies or putative companies that want to take advantage of this status in order to engage in more entrepreneurial activity, which is the justification for the scheme, is not borne out by any of the consultation. There were 184 responses to the original consultation. Three supported the scheme: only two more than the number of supporters in your Lordships’ House. One supporter was apparently the Institute of Directors. When we last debated this, the noble Baroness, Lady Wheatcroft, said that when she asked whether it had consulted its members, the answer was no. So there is not much support there.
Justin King, the chief executive of Sainsbury’s, who is on the Prime Minister’s business advisory group, said that trading basic employment rights for shares was not what we should be doing. He said:
“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”.
Lastly, I come to the point that is so important and that was raised by the noble Baroness at the end of her remarks: the issue of efficient tax planning. The Office for Budget Responsibility estimates that this proposal could cost up to £1 billion a year in lost income to the Treasury. It states:
“It is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning”.
In this time of austerity, is this an appropriate, let alone a moral, thing for your Lordships to be doing: to hand out potentially £1 billion a year in pursuit of a policy that the Minister, and Ministers in another House, have not declared as being in support of more efficient tax planning but which they have stated is in order to achieve entrepreneurial gains? One of the biggest impacts of the policy could be one that is completely opposite to the intentions of its founders.
I will leave the last word to the chief executive of the Employee Ownership Association. We all want to see wider employee ownership and engagement in our companies. In a statement put out this afternoon to inform the debate, Iain Hasdell said:
“There is absolutely no need to dilute the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost employee ownership … all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of the workforce”.
Our duty this afternoon is not to dilute the entitlements of the workforce, without which there will be no growth and no recovery in this country.