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The First Deputy Chairman: Order. I hesitate to intervene, but the word "Ken" has now been used twice. I am sure that both hon. Members know that we do not refer in the Chamber to people's names--the hon. Gentleman should say,"the right hon. and learned Member" or "the Chancellor of the Exchequer".
Mr. O'Brien: You are right, Sir Geoffrey. I put the name in quotes, but you are right to correct thehon. Member for Dover and me.
Mr. Christopher Whitehouse's text book, "Revenue Law: Principles and Practices," says of executive share options:
all too often--
and all sorts of other wonderful benefits.
The Financial Secretary asked us to go into a history of what he called "all our yesterdays". The fact that I understand that phrase may date us both, but I remind him that it was Labour that initiated proposals for increased employee shareholding. Labour's 1978 profit-sharing scheme provided favourable tax treatment only if all employees with at least five years' experience benefited on similar terms.
The 1980 "save as you earn" scheme introduced by the Conservatives continued the principle of benefits on similar terms, but in 1984 Lord Lawson introduced the approved discretionary share option scheme--executive share options. That removed restrictions and allowed the company--in practice, directors of the company--to choose who received the benefits. The 1984 scheme gave a one-way bet: an option to purchase if the share price rose--if it fell, no one would need to buy the shares.
Executive share options were always aimed at a small group. On introducing them, Lord Lawson said that his aim was
Those options were not intended for all. They were a special incentive for the preferred. The taxpayer provided a double largesse to directors in the privatised gas, water and electricity companies. Not only was the taxpayer forced by the Government to sell off the shares at a knockdown price, but the options on shares had a built-in, guaranteed price increase which, coupled with the tax concession, meant that those who had a lot of shares made an awful lot of money.
The schemes allowed massive profits that were unjustified by performance. In British Gas alone, 1,042,141 share options were awarded to its directors, including 268,000 to Cedric Brown, the chief executive. That was on top of his salary rise, following privatisation, of 75 per cent. As privatisation progressed, so the scandals surrounding share options grew.
Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury):
Why does the Labour party want all those eligible to receive share options to have them on similar terms? Why should not directors give different employees in different areas of the company, who might have contributed different amounts to the company's profitability, different levels of share options?
Mr. O'Brien:
The hon. Gentleman was not here for the earlier part of the debate, so he does not realise that we have already dealt with that point, which was raised by the Financial Secretary. Indeed, I intend to deal with it again later in my remarks. If the hon. Gentleman had watched our debate on television or attended the Chamber he would be a little better informed about what has been said.
I was outlining the ways in which the various privatised utilities had benefited. In all, they issued more than£100 million in share options. Many of those options have yet to be exercised and the benefits realised. Coupled with that, we have seen directors earning massive amounts through Government policies on share options. As my hon. Friend the Member for Sherwood (Mr. Tipping) said, 40,000 jobs were lost in the electricity industry, 9,000 in the water industry, 26,000 in British Gas and 90,000 in British Telecom.
Mr. John Marshall:
Does the hon. Gentleman agree that those massive job losses show that those industries were heavily overmanned when they were in the public sector, which is a further justification for their privatisation?
Mr. O'Brien:
It is interesting to hear thehon. Gentleman justify unemployment. Is that his policy?
Mr. Marshall:
The hon. Gentleman asked whether it was my policy to increase unemployment. Is he not aware that unemployment in Britain is lower than anywhere else in the European Union? Is he not aware that the level of employment in Britain is higher than in almost any other European country? That is job creation. Thehon. Gentleman supports job destruction through the social chapter and a minimum wage.
Mr. O'Brien:
The hon. Gentleman tried to justify job destruction in the privatised utilities and then tried to suggest that in some way he was responsible for lowering unemployment. In fact, since the Conservative party took office, unemployment has doubled.
Mrs. Helen Jackson:
Have not the job losses in the privatised utilities occurred partly as a result of the huge practice of outsourcing and contracting out core operations such as sewerage and water pipe maintenance, which should be done by the employees who then--
The Chairman of Ways and Means (Mr. Michael Morris):
Order. We are debating share options, and we should get back to that subject.
Mr. O'Brien:
My hon. Friend the Member for Hillsborough is right, but I heed your words, Mr. Morris.
Even the Prime Minister said:
The Government refused to intervene and deal with the abuses in the privatised utilities. As my hon. Friend the Member for Sherwood said, they vacillated and abdicated their responsibility to end the abuse. In contrast, Labour has always believed that the Government must undertake the minimum amount of intervention necessary to correct market failures and inadequacies and to enable the economy to work fairly for all society. Labour wants competition and success in industry. We recognise that the market can sometimes fail, so minimal intervention by Government is right to create the circumstances for fairness. That is why we put forward the amendment.
Eventually, the Government were forced to do something, due to the anger of the public and the campaigns of Labour Front Benchers. The Government appointed a committee of directors to look at salaries and share options for directors--again, an example of double standards. Here I should refer to the amendment, because the debate at that time is the reason why we tabled the amendment. The Government decided to deal with the abuses by appointing a committee of directors to consider their own salaries and conditions. When have the Government ever suggested that, if nurses want a pay rise, they should set up a committee of nurses to determine how much that rise should be? That was an abdication of leadership on the part of the Government.
The amendment takes further Labour's campaign to create a stakeholding economy, and clearly delineates the difference between the parties. While the Conservatives created perks for the privileged in 1984, Labour wants to give all employees a stake in their companies. The amendment helps to crystallise the distinction between the Conservatives and Labour. Workers already have a limited stake in their companies through their jobs and through their dependence on those jobs for an income for their families, but we want to give them a greater stake in the future of the business and allow them to identify even more with the success of the enterprise.
Many firms already recognise the importance of employee stakeholding, which provides motivation and incentives for people at work. Labour believes that shareholding by employees is a key way forward as we try to create a British stakeholding economy, and it can also bring massive benefits to British industry. One of the great failures of the Tory Government is that, for all their rhetoric, they have not provided the shareholding democracy that they have advocated. The Government schemes to increase employee share ownership have all too often been open to the sort of abuse that has taken place in the privatised utilities.
Mr. Jack:
Does the hon. Gentleman acknowledge that 2 million people are involved in the profit-sharing and save-as-you-earn schemes? Does he further acknowledge that, since we came to power--as my hon. Friend the Member for Dover (Mr. Shaw) said--the number of shareholders in this country has risen from 3 million to 11 million?
"The reason that many more of these schemes have been established than all employee schemes is precisely because they are not all employee schemes and benefits under them can be granted to selected employees and because the value of the benefits they can be given is much higher. Those company directors who granted share options saw great advantages to themselves in the schemes. They could be selective about who they gave the benefits to and so"--
"they gave the benefits to themselves. For the directors of the newly privatised utilities, they became great milch cows, providing perks, pensions, pay rises"
"to increase the incentives and motivation of existing executives and key personnel".--[Official Report, 13 March 1984; Vol. 56, c. 299.]
9.30 pm
"I do not agree with the excessive and unjustified salary increases. I have made that perfectly clear. But for companies within the private sector that must be a matter for shareholders and not for the Government."--[Official Report, 22 November 1994; Vol. 250, c. 464.]
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