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The First Deputy Chairman: Order. That was a long intervention.
Mr. Jack: I hope that my reply will be shorter, Sir Geoffrey.
I am sorry that the hon. Member for West Bromwich, East (Mr. Snape) is not in his place this evening, because he should have an opportunity to explain to the House why he made a principled attack against the proposal for privatising bus services but was prepared to put that to one side and enjoy the benefits of share options, which the policy that he opposed enabled him to have. He may have been ahead of his time, judging by the events referred to only a few hours ago at Prime Minister's Question Time. It is interesting to see the juxtaposition between the principled stand in public and the private change for private gain. My hon. Friend is right, and I congratulate him on his forensic skills in digging that article out.
The amendment has been tabled by the same party that voted against the save-as-you-earn scheme during the Committee stage of the Finance Bill in 1980. In a relatively short time, our policies have woven their magic and Labour Members are now coming round to our way of thinking. If a sinner repenteth, it must be applauded.
Mr. Darling:
We are all concerned that this debate should be accurate, and the Minister will no doubt recall
Mr. Jack:
I shall come to that in due course. I do not disagree with the hon. Gentleman's point about history, but something clearly happened around 1980 to change Labour Members' minds on this matter. In fairness, the hon. Gentleman welcomed the company share option plan and attempted to make a fist of amending it. However, people must be reminded where the Opposition are coming from because, in recent times, they have made much of the virtues of owning some kind of stake in something but have done little to acknowledge that we are the true pioneers in that area.
The hon. Gentleman asked me a straight question: do we support his amendment? Before explaining why we do not, I wish to pick him up on one point. It is typical of Opposition Front-Bench spokesmen to get into their minds a sound nibble such as, "The Tories only want this scheme for the benefit of a few rich, well-heeled people", and to keep repeating it.
I remind the hon. Gentleman of events that occurred on 17 July when my right hon. and learned Friend the Chancellor, having acquired the knowledge of what was in the Greenbury report, moved very quickly to address those concerns and deal with the question at the heart of the hon. Gentleman's probing. As a result of a healthy debate, we now have a scheme on the stocks--the company share option plan in the Finance Bill--that addresses precisely the issue that the hon. Gentleman mentioned. I am sure that he would not disagree that the proposal in the Bill is moderate in terms of who may benefit from share option plans. I believe that the measure addresses his concern, and I hope that we are at one on that. I think that the facts speak for themselves.
The set of words repeats the definition used in the old executive share option scheme which the hon. Gentleman, as a lawyer, may have studied carefully. The phrase "manifestly less" has become well known in law since 1984. It means: not less by any amount that can be measured--in practice, not less at all. I hope that that clarifies the position--[Laughter.] I have to give the explanation in language that lawyers understand. Thehon. Member for Dudley, West (Mr. Pearson) may sometimes have difficulty with lawyers' language, but thehon. Member for Edinburgh, Central is a lawyer and I
would expect him to understand it. I also expect him to have studied what happened in 1984. Having defined "manifestly less" in legal terms, I will say more simply that shares should not be granted under option at below the market price. That can be understood in everyday language.
Mr. Darling:
I appreciate the Minister's reference to 1984. If it is the Government's intention that the price should not be less at all, and as we are all in favour of plain English, why do not the Government break new ground and simply put "less than at all"? Then everyone in the House and, more importantly, outside it, would fully understand. The problem of relying on legal decisions is that lawyers have historically made a lot of money arguing about what is meant. If what is meant is "not less at all", why not say it?
Mr. Jack:
For the sake of precision, I perhaps embroidered the words a little. To put the matter beyond misadventure, I shall write to the hon. Gentleman and spell out the precise terms. I shall place a copy of the letter in the Library of the House, so that we can all study it for our greater benefit.
The hon. Gentleman also asked about the 15 per cent. discount. In practice, very few companies use the15 per cent. discount provisions, and the new company share option plan does not, as the hon. Gentleman's first question suggested, allow a discount to be available. The previous facility was available only if a company also had an all-employee scheme. I hope that I have dealt with the two specific points that the hon. Gentleman raised.
Having welcomed what the hon. Gentleman said in his opening remarks about the proposal of a company share option plan, I should remind him that we already have two existing tax-relieved all-employee schemes: the profit-sharing and the savings-related plans. They were introduced on an all-employee basis to stimulate wider employee share ownership across the board at an affordable Exchequer cost. The objective of the executive option relief introduced in 1984 was different: it was specifically designed to enable companies to reward key employees with options over shares that would increase in value prospectively in response to their hard work and commitment.
As my right hon. and learned Friend the Chancellor explained in July last year, we believe that companies that wish to give incentives to key employees in that way no longer need a tax relief. A variety of option schemes and other long-term incentive arrangements offer alterative ways of linking executive rewards to corporate performance, and none of them qualifies for special tax treatment.
The spirited and constructive debate that started in July last year as a result of my right hon. and learned Friend's announcement that he was going to withdraw tax relief on the existing executive share option scheme revealed that there was a demand for a third type of employee share ownership scheme in addition to the two existing all-employee schemes to provide a more flexible way of granting options to lower-paid employees. That explanation addresses one of the concerns expressed by the hon. Member for Edinburgh, Central when he spoke about who would benefit.
The debate stirred up the issue--the hon. Gentleman exemplified that by mentioning Asda, but that company was not alone. Many other retailers also expressed a wish
to sustain such a scheme. They wanted to target their schemes at the more modestly paid of their employees, such as middle managers and even those on the shop floor. We listened carefully, but the companies that made those representations made it clear that they did not want a compulsory all-employee scheme. My hon. Friend the Member for Stamford and Spalding adverted to that in his telling contribution when he said that there was a difference in every respect between the Government and the Opposition because the Opposition always want to seek compulsion whereas we seek an element of choice.
Those self-same companies wanted to be free to design their schemes as they wished, and to structure them so that they could reward loyalty. If every employee who was with the company on the day that the options were granted had to receive some options--as the amendment suggests--it would be impossible for company share option plans to be used to reward loyalty. That is the first reason why I am unable to accept the amendment.
Mr. Darling:
The option is always open to companies.
Mr. Jack:
If the hon. Gentleman wants to tell me what it is, he can always intervene. The sedentary debate is perhaps not entertaining the House. I see that thehon. Gentleman is not pushing his point, so I shall continue.
There is an important point to make in relation to smaller companies. The share capital of small companies is a valuable and limited asset. It would simply not be appropriate for such a company to have to grant options to all its employees when it wanted to grant options. In that context, where would the Opposition draw the line? I do not think that they have thought through the effect of the amendment in reality as it shows a clear lack of understanding about small companies.
Today I received a further, supporting piece of evidence that I feel duty bound to put before the House. It came in a letter from the director general of the Institute of Directors, Mr. Tim Melville-Ross, dated 23 January. He said:
Those are telling words. The letter continued:
I saw that fact for myself when I visited a fibre optics company called Coe in Leeds. Representations were made to me by the company asking whether the Government could restore a share option scheme--similar to the one that we have introduced--precisely because it had problems attracting a top-quality sales director when it could afford only a limited salary. I believe that the scheme that we have now entirely meets that company's wishes, since the company wanted to focus its scheme on that specific need.
For the reasons that I have given, we should have respect for the difficulties of the small company share structure.
I remind Opposition Members that the new company share option plan tax relief is part of a wider package, which includes substantial improvements to both the existing all-employee share schemes.
The hon. Member for Dudley, West asked about the scope and scale of those schemes. It is interesting to note that about 80 per cent. of listed companies have one or more approved schemes, about 55 per cent. of the companies that have one or more approved schemes are unlisted and about 40 per cent. of companies that have one or more approved schemes have an all-employee scheme. It is interesting that it is in the profit-sharing and save-as-you-earn schemes, in which about 2 million people are involved, that all-employee activity is very widely spread.
The hon. Member for Edinburgh, Central, very properly, asked whether we had considered the scope of who was able to benefit from share participation--whether participation was restricted to a narrow group.I hope that he is now aware, as a result of that exemplification of the numbers involved in the save-as-you-earn and the profit-sharing schemes, that those benefits are very widely available to all employees. I say that because it demonstrates clearly why companies wish to have one other scheme that they can tailor to meet the individual needs of their business. As the Institute of Directors rightly guides us, companies want some flexibility in how they will go about that, especially bearing in mind the special position of the smaller company and its share structure.
"Specifically, we do not support the proposal that all employees should be eligible for share options rather than the allocation being at the discretion of management (which is the current position). Replacing management's discretion to provide share options as incentives by the principle of universality represents, in our view, another restriction and inflexibility on business."
"Moreover, the amendment ignores the particular problems in the unquoted company . . . It is common in a private company to have to offer share options to attract and motivate one or two key people."
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