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Mrs. Helen Jackson: I hope that the Government accept the amendment, which would widen the meaning of the clause. It is a genuine attempt to be helpful. My hon. Friend the Member for Edinburgh, Central(Mr. Darling) might even have said that the Labour party believes that all those working in an enterprise should have a stake in it. That is important throughout industry. We support employee share ownership in all sectors and commend those where such schemes have been developed.

The Central Statistical Office share register survey at the end of 1992 clearly shows that, although individuals held about 20 per cent. of all shares--80 per cent. are held by large institutional shareholders--the figure for shares in privatised utilities was 24 per cent. At the time it was said that, after all the publicity given to privatisations, it was surprising that the differential between the two was only 4 per cent. Nevertheless, 4 per cent. represents about 7 million shareholders.

A National Opinion Poll survey the following year of individual shareholdings in privatised utilities--including those held by lower-grade employees in those utilities--showed a number of token holdings of just one or two shares. However, those token shareholdings gave those employees a stake in their company and allowed them to say their bit at the annual general meeting, which is important. In fact, only a quarter of individual shareholders in the utilities held more than a token number of shares.

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I stress that it is not just the major shareholders who need to be encouraged to take a full interest in an enterprise, especially in the privatised utilities. With public service utilities such as the water industry, it is important that all those involved in the business feel that they are playing their part in delivering a quality service to the public. Employees and members of the public are

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entitled to hold token shareholdings, and that should be welcomed. The Opposition recognise that shareholding is not simply about money-making; it is about someone participating in the enterprise where he works.

There has been a significant increase in individual shareholders in Yorkshire following the water problems in the summer. People saw it as a means to enable them to make their point about what happened. We support any Government measures to increase shareholding and to limit the excesses of industry's fat cats and the executives of the privatised utilities. However, it is still not clear that the Government really want to extend the rights and responsibilities of individual shareholders in those companies.

I draw the Government's attention to a recent example of where their intentions might have seemed to be good, but in reality they were not interested in listening to individual shareholders. A major public inquiry held on 14 November was attended by individual shareholders, many of them employee shareholders, in Yorkshire Water. The inquiry lasted three days. It is only tonight that the report of that inquiry has been published, even though it was on the desk of the Secretary of State for the Environment on 23 November.

Individual, including employee, shareholders in Yorkshire Water were concerned about the running of their enterprise. The Government need to ask themselves whether they are hypocritical--a word already used tonight--because they obviously did not recognise those shareholders as important people in that company. They refused to recognise their real concerns, even though they gave evidence to the inquiry over three days. That is unforgivable.

While the Minister is not responsible for that matter, I am sure that he will take note of this as a good get-out clause. The report went out with a covering letter, in which one must be aware of the double negatives. The letter states:

"If the Secretary of State had not decided, in the light of Yorkshire Water's request, to defer taking a decision on the application and the report, it would have been necessary to address the many points raised in that report. Since the applications have now been withdrawn, it would now serve no useful purpose to go further into those questions."

It is disgraceful and arrogant to say to the employees and shareholders in Yorkshire Water who spent three days in Dewsbury giving their evidence that that evidence is not even worthy of consideration. In order to rescue the Government from such hypocrisy, I am sure that the Minister will be keen to accept the amendment. The Government will then make it clear that the measures that they want to put in the Bill will benefit all employees and all shareholders, whatever their position in a company.I look forward to the Minister's response.

The First Deputy Chairman: I call Mr. Quentin Davies.

Mr. Quentin Davies (Stamford and Spalding): Thank you, Sir Geoffrey--it is a great pleasure to use those last two words.

I have listened with great interest to the hon. Members for Sheffield, Hillsborough (Mrs. Jackson) and for Edinburgh, Central (Mr. Darling). There is no doubt that,

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at first sight, the notion of all share options schemes being automatically available on the same terms to all employees is attractive and appealing. All employees like to feel that they are part of a firm and that they are committed to that firm's success, and such morale is essential if a company is to be successful. But I fear that that appeal--while very obvious--is a little superficial.

Once again, Labour has not thought through what the consequences would be of implementing a populist policy--in this case, a policy using taxation to achieve certain political purposes relating to the way that industry is run. It is clear that, if share options are ultimately exercised, the existing shareholders will be diluted. In a sense, the whole object of the scheme is that employees and directors who benefit from share option schemes will share in the profits, all of which would otherwise be attributable to the shareholders alone.

It may be in the interests of the shareholders to make sure that those who contribute specifically to increasing the share price--thereby increasing the value available to the shareholders--do share in that benefit. It is therefore essential that there should be an element of selectivity in the application of the schemes, which are not appropriate as a firm-wide or universal way of remunerating employees. There are many other ways of doing that, including tax-efficient ways provided for by the Government, such as the company employees share scheme, which has been in operation for 10 years or more.

When one gives employees an option, by definition one is giving them an incentive to increase the value of the shares of the company concerned. The shareholders are saying that they believe that the employees have it in them to make a real contribution. If they increase the value of the shares, the shareholders will give them some benefit or allow them to share in the equity interests of the firm. Such an incentive must be selected and targeted on those employees or directors who are in a position to contribute directly in that way.

While in some cases it would be quite right to have several different schemes with different rules and amounts for the options in the same company, it would be inappropriate to have share options as a universal scheme. The amendment does not make much sense in terms of achieving the management and motivating objectives of a good share option scheme.

Mr. Darling: The hon. Member is falling into the old ways of the Conservative party, which hold that the only people who need incentives and to be encouraged and handed out largesse are those at the top, while those at the bottom do not really matter. While it is okay to hand baubles to those at the bottom, it is only those at the top who need tax breaks and other such benefits.

Does the hon. Gentleman accept that the amendment specifies that schemes have to be made available on similar--not identical--terms? The amendment would make sure that, if the tax system is to be used--in other words, if taxpayers' money in terms of tax forgone is to be used--the maximum number of people should benefit. If company shareholders want to provide benefit to certain individuals over and above that, there is nothing to stop them from doing so, but not through a system subsidised by the taxpayer.

Mr. Davies: The object of a share option scheme is not that the maximum number of people should benefit but

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that the maximum benefit should be achieved for the shareholders of a company by those who are being asked for their share equity interest. The hon. Gentleman may find some difficulty in following that distinction, but it is a real one. If he had any experience of running a company, I am sure that he would accept it.

The hon. Member for Edinburgh, Central used the word "top"--no doubt demagogically. I was not suggesting at all that only the top people or top management should benefit from a share option scheme. Far from it. In many cases, a quite disproportionate contribution to the success of an enterprise can be made by someone who is not particularly highly ranked in the hierarchy of a company. For example, someone employed in a research-based or hi-tech company might make a fundamental contribution to the future prosperity of that enterprise by inventing a new product or substantially improving an existing one. Perhaps an employee may find some new technique of manufacturing.

Such people have made a quite exceptional contribution, and it is right that there should be a mechanism available to reward them proportionately. It would not make sense to extend that benefit to every other employee in the company. The same applies to a salesman, who may be quite junior in the hierarchy of a company but who may produce a major contract that may have an enormous impact on the company's prosperity, on the value created for shareholders and--in a case such as that--on the job security of all of his fellow employees.

The hon. Gentleman has introduced an extraneous element--a total red herring. He may have done so to try to throw sand in the eyes of Conservative Members, but he must know us well enough to know that that would not succeed. He may, on the other hand, be genuinely confused about the matter, in which case I hope that the debate will give him an opportunity to reflect on it.

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