Previous SectionIndexHome Page



'( ) In sub-paragraph (4) "co-operative" means a registered industrial and provident society which is a co-operative society.
For this purpose--
"registered industrial and provident society" means a society registered or deemed to be registered under the Industrial and Provident Societies Act 1965 or the Industrial and Provident Societies Act (Northern Ireland) 1969; and
"co-operative society" has the same meaning as in section 1 of the 1965 Act or, as the case may be, the 1969 Act.'.

No. 12, in page 264, line 36, leave out paragraph 128.

No. 13, in page 267, leave out line 23.--[Mr. Timms.]

Clause 49

Phasing out of approved profit sharing schemes


Amendment made: No. 58, in page 34, line 42, leave out "6th April 2002" and insert "1st January 2003".--[Mr. Timms.]

Clause 50

Phasing out of relief for payments to trustees of profit sharing schemes


Amendments made: No. 59, in page 35, line 12, leave out "6th April 2002" and insert "1st January 2003".
No. 60, in page 35, line 20, leave out "6th April 2002" and insert "1st January 2003".--[Mr. Timms.]

Clause 56

Further provisions about share options

Mr. Richard Ottaway (Croydon, South): I beg to move amendment No. 131, in page 40, line 19, after "be", insert "multiplied by 2.5 and".

I make no apology for the fact that the amendment would largely negate the impact of imposing national insurance contributions on share option schemes.

I want to talk about entrepreneurial activity. We are well aware of what this Government measure will do. The problem has been rightly identified by all involved. A start-up company that has little capital or that makes little profit, and whose shares may be quoted or are at least tradable, may employ many staff on a contractual basis that includes large share options. On the exercise of those options, the national insurance contributions are levied not only on the employee, but on the employer. That imposes a large capital liability on the employer, which he may not have the funds to meet. The Government recognise the problem and have made a gesture, but in our eyes the proposal merely takes things from very bad to bad.

5 pm

I want to talk about entrepreneurial activity largely because that is what the measure will hit. After the election, the Government produced a competition White

19 Jul 2000 : Column 402

Paper that built on the efforts of my right hon. Friend the Member for Henley (Mr. Heseltine) when he was Deputy Prime Minister, and a document on the knowledge-driven economy, of which my right hon. Friend was the driving force until 1997. The Institute for Public Policy and Research produced a report entitled "The Entrepreneurial Society", the launch of which the Prime Minister attended. He supported the teaching of entrepreneurship in schools, which was one of the report's main themes, and I shall return to that point. The Government may talk the talk, but do they walk the walk? [Interruption.] Well, that is important and we want to know.

At first blush, the Government do not do too badly for entrepreneurs. There have been changes to capital gains tax, capital allowances for small and medium-sized enterprises are now 40 per cent. and, for the next three years, allowances for certain information technology equipment will be 100 per cent. for small companies, which will go a long way to help the sort of company that the measure will hit. However, medium-sized companies seem to have dropped out of that relief. Research and development reliefs were discussed upstairs in Committee, and a couple of weeks ago the Government announced a 55 per cent. increase in public expenditure on science.

Although I am prepared to give the Government the credit for that, I do not want to go too far or be too kind and generous. The point is that these measures are finely tuned and focused. They address a particular sector, but what of the colossal burden of corporate taxation and regulation that has been dumped on business overall? It will completely swamp everything that these measures will introduce.

Since 1997, business has had to absorb the cost of union recognition and the additional costs of maternity leave and paternity leave, which have been much publicised. It has also had to absorb the cost of rights to time off, rights for part-time workers, the national minimum wage and the working time directive, so it comes as no surprise that the Institute of Directors has said that the additional regulatory burden is costing business £5 billion a year. However, the Labour party election manifesto said:


so far, so good--


The Economic Secretary to the Treasury (Miss Melanie Johnson): And we have.

Mr. Ottaway: I disagree. For the reasons that I am setting out, the effort to promote dynamic and competitive business is being stifled by measures such as those we are debating. If the hon. Lady talks to industry and business, she will find that they agree.

There is extra taxation on business--the pension fund liabilities, for example. It is dawning on millions of people around the country that there has been a raid on their pensions that will cost them and their employers substantial sums. The Government have introduced the windfall tax on the utilities, corporation tax changes and the climate change levy, which we have discussed. The infamous IR35, which is having a colossal impact on the IT sector and the way it behaves, is not stimulating

19 Jul 2000 : Column 403

business in the way that the Government claimed in their manifesto. Stamp duty, which was debated in the House yesterday and upstairs in Committee, hits business particularly hard. It took heavy pressure from the Opposition for the Government to amend their double taxation relief proposals. The proposals that they originally came up with were outrageous. Thanks to the Conservative party, which is business's friend, the Government have largely climbed down on the measure, but why they should dream of introducing it in the first place is beyond me.

We have had the additional fuel duty, which is having a big impact on industry that relies heavily on transport. We have the aggregates tax and also the national insurance contributions on share options. It comes as no surprise that Sir Clive Thompson, chairman of the Confederation of British Industry, drew attention to Labour's stealth taxes just before the March 2000 Budget. He said:


Given that sort of reaction, and if that volume of taxation is going on business, why on earth do the Government bring in such a measure, which will stifle entrepreneurial actively, not help it?

Ministers must get out there and talk to the people who are at the coal face, who have a wage bill to meet every week and who are up against the heavy burden of corporate taxation and regulation, and listen to them. They would then think twice about putting such a burden on Britain's entrepreneurs.

What sort of message does the proposal send to entrepreneurs in this country? There is no doubt that entrepreneurial activity has an impact on the economy. If we have more entrepreneurs, it tends to generate more economic activity and the economy grows. Whatever side of the political debate we are on, we all want the economy to grow.

In the United Kingdom, we are not doing badly with entrepreneurial activity--at least until we compare ourselves with other countries. Just 3.3 per cent. of the people of this country are trying to start a business, but in the United States it is twice that number--more than 6.5 per cent. of people are engaged in entrepreneurial activity. Only 16 per cent. of entrepreneurs in this country think that there are good opportunities that are worth having, whereas in the United States it is 57 per cent., so why do we have those big gaps? What is going on? What lessons can be learned about entrepreneurial activity?

Mr. John Bercow (Buckingham): Before we accept clause 56, which my hon. Friend wisely seeks to amend, would it not have been helpful if members of the Treasury Bench had spoken to the director general of the British Chambers of Commerce, Mr. Chris Humphries, who said as recently as 20 January this year that, despite their rhetoric, the reality is that the Government have dramatically increased the regulatory burdens that threaten small business competitiveness?

Mr. Ottaway: My hon. Friend makes his point very well. That is the thrust of the argument. That theme was

19 Jul 2000 : Column 404

taken up by the Institute of Directors, whose assessment was that regulatory burdens on business amounted to about £5 billion per annum.

I was talking about entrepreneurial activity in this country. When the Prime Minister attended the launch of the report published last year by the IPPR, he said that entrepreneurship should be taught in schools--no doubt the message went out to the relevant Ministers. It is worth looking at a written answer from the Secretary of State for Education and Employment. It spoke about the introduction of consumer and education entrepreneurial skills in the national curriculum and went on:


At key stage 4, there will be more lessons in managing personal money.

That shows that the Government's vision of entrepreneurial lessons and teaching entrepreneurial activity in schools involves telling children how to handle their own money. That is off-beat, and it is not the answer. It will not promote entrepreneurial activity or change the culture. The Prime Minister and the Ministers concerned should revisit the report entitled "The Entrepreneurial Society" and address far more seriously the points that are raised.

To return to national insurance contributions on the exercise of share options, I am grateful for a memo from Mr. Stephen Allott of Micromuse, a software and hardware company in this country, with considerable experience in the United States. In his briefing paper this month he states:


He goes on:


Mr. Allott continues:


There we have an experienced business man contrasting the United States with the United Kingdom, and demonstrating how unattractive such a comparison is.


Next Section

IndexHome Page