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The Financial Secretary to the Treasury (Mrs. Barbara Roche): I congratulate my hon. Friend the Member for Rotherham (Mr. MacShane) on obtaining the debate and on the manner in which he has advanced his argument. His knowledge and expertise on these matters are well known, and he has demonstrated them again today. I am grateful for his encouragement on this important matter, and I assure him that we are keen to make progress.
The Government are firmly committed to increasing employee share ownership. Research in both the United Kingdom and the United States of America implies a clear
link between employee ownership of shares in the company for which they work and an increase in productivity, particularly when modern management promotes active participation in the business by employees. Employee ownership schemes and the other policies that the Government have pursued over the past two years provide a package of measures to promote productivity.
Employees who are also owners have a real and identifiable interest in how their company does. They can benefit directly as stakeholders, and that increases commitment and motivation. They become more aware of their companies' aims and objectives because they own part of the companies, even if it is a small part. Quite simply, employee share ownership can bridge the gap between employees, managers and shareholders by aligning more closely the interests of the work force and those of the owners of the company. It offers a way of working in partnership. We are committed to people working in partnership in many different ways. Where employee ownership works properly, the results are wonderful. Employee owners have an incentive to contribute more actively to the development of their business by raising productivity, from which they can benefit directly.
Employee ownership is not supported only by the Government; companies have experienced the benefits. A senior manager from Fl Group, an information technology company, has said that its directors believe that the
The second reason why the Government support and promote employee share ownership is that through the tax system we can encourage participation by all employees, not merely the few senior staff. The current Inland Revenue approved schemes have enabled many lower-paid employees to become shareholders in the company for which they work.
The third reason why we support and promote employee share ownership is that it can be a useful and cost-effective tool for some companies, especially smaller entrepreneurial businesses and start-up companies--again, my hon. Friend has mentioned that today and in previous discussions--to help them attract and retain key employees in an increasingly competitive global market.
The qualifying employee share ownership trust, or QUEST as it has become known, offers tax advantages to companies, particularly small companies, to set up ESOPs. We are looking at a number of representations about QUESTs made by some of the organisations that my hon. Friend mentioned. In particular, there are concerns that QUESTs are not being used for their originally intended purpose, which was, as I have said, to help small family-owned firms transfer ownership to their employees.
At present, three tax-advantaged share schemes are designed to promote employee share ownership in the UK. Those enable employees either to acquire shares free or to buy them through an option arrangement. Although
those schemes have been popular with employers and employees, they have not sufficiently harnessed the ability of employee share ownership to encourage corporate vitality, to create partnership in business and, importantly, to boost productivity.
The Government want to reward long-term commitment by employees. We want to encourage the new enterprise culture, in which everyone contributes and benefits from success. The way that we are going to do that is by taking a fresh approach to the whole subject. I take my hon. Friend's point that it is a question not merely of the design of the new scheme, but of being evangelical about the whole concept. I certainly regard that as part of the approach that we will adopt.
My right hon. Friend the Chancellor of the Exchequer has set a target to double the number of companies that offer shares to all their employees. We are not going to do that just by tweaking the existing schemes. Instead, after consulting widely, we have announced a revolutionary new scheme, which unites the interests of employer and employee in a new partnership.
That scheme, aimed to promote shares for all, will for the first time offer employees the opportunity to buy shares in their company out of their pre-tax salary. By owning shares directly rather than simply through share options, employees will have a real opportunity to make the company in which they work succeed. They will also enjoy greater tax benefits the longer that they hold their shares. Companies will also enjoy tax breaks for introducing and operating the scheme. All in all, this will be the most tax-advantaged share scheme ever introduced in the UK.
The Government want to get this right. We want a scheme that meets our objectives and is attractive to employees and companies. To achieve that, I have asked an advisory group, made up of representatives from leading share scheme practitioners, companies, academics and trade union members--some of them mentioned by my hon. Friend--to work with the Inland Revenue to play a key part in the development of the new scheme. Using people in that way is a radical new idea. It is, perhaps, a third way ahead, to echo my hon. Friend. It is one that has been successful so far and I am grateful for the great contribution that we have made.
We are also listening to companies directly though the focus groups that Pro-Share, a leading supporter of employee share ownership, has organised. We are also extending the consultation process across Departments--my hon. Friend also made that point. That includes the Department of Trade and Industry as well as the Revenue and the Treasury. The initiative is a good example of how the Government are bringing private and public sectors together to create policies that work well in practice.
Let me reassure my hon. Friend. We are not merely looking at public limited companies; the Government also recognise the particular difficulties faced by small businesses and start-up companies. I have therefore asked the advisory group to consider the problems that small companies have when operating share schemes to find out what we can do to make this easier for them. They have already made a number of useful recommendations, which will help small companies give shares to all their employees.
At the same time, the Government recognise that one of the key constraints on growth for small ambitious companies is the quality of its management. I know that
that area interests my hon. Friend. It can be difficult for companies to attract high-calibre managers from mature companies to a more risky venture. Therefore, I have also asked the advisory group to consider a specifically targeted scheme, known as the enterprise management incentives scheme. That will help small, higher-risk companies to attract and retain key managers. That is essential for our productivity and growth and for the entrepreneurs of the future.
Of course, we recognise that other forms of employee ownership and participation are also important. Businesses are able to and do operate employee participation policies without shares. The John Lewis Partnership, which my hon. Friend mentioned, is a good example of that.
We will be publishing draft clauses for the new schemes later this year for further consultation. The finished legislation is to be included in next year's Finance Bill.
These measures will give companies new tools to promote partnership with employees and also a means to increase productivity. I am pleased to say that there are clear indications that companies both big and small are excited by the prospect of these new schemes.
My hon. Friend was right to say that we need to bring about a change of culture. He was also right to say that this is an issue not merely for the Treasury or the Revenue, but for the Department of Trade and Industry and other interested Departments.
We have a task--to engage our companies, particularly the new high-growth sector, with possibilities and schemes of this kind that can take the productivity and growth agenda forward. We are determined to do so.
I congratulate my hon. Friend on securing today's debate. It really takes the agenda forward. I can assure him and the House that we will discuss this matter further.
Mr. Martin Bell (Tatton):
I am grateful for the opportunity to raise the case of Major Milos Stankovic, MBE, of the Parachute Regiment. I last did this in an Adjournment debate 19 months ago. A great deal has happened since then. The injustices suffered by this serving major of the British Army have continued and intensified. His has been a long and lonely ordeal. At the same time, the excuse available to the Government last time, that this was an operational policing matter, has faded because the Ministry of Defence police have investigated and that phase is over.
"cornerstone of workforce share ownership has been a key feature in developing a culture of shared success in the group, helping to foster a high level of workforce commitment and loyalty."
If I had to pick out one word from that quote, it would be "culture", to which my hon. Friend alluded.
1.28 pm
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