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Linda Gilroy (Plymouth, Sutton): I add my voice to that of my hon. Friend the Member for Sheffield, Heeley (Ms Munn). As a member of the Standing Committee who struggles to understand some of the more technical clauses, I could perhaps say in plain English that the new clause is a way of moving goal postsif I may make an oblique reference to a subject that we are all trying to pass overin a favourable way. Perhaps that might have been helpful out in Japan earlier today.
I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on the new clause. By means of it, probably after some rather painstaking discussions with our hon. Friend the Paymaster General, he proposes to extend income tax and capital gains relief for share incentive plan trustees from two to five years under the current rule to 10 years, to correspond with the time allowed in the Bill for shares to be distributed.
At present, corporation tax deductions are given when shares in the share incentive plan trust are distributed to employees. The Bill provides for corporation tax deduction to be given earlier, when a company contributes money to a share incentive plan trust to buy a block of shares. I think I have got that right. Under the new clause there will be no risk of the benefit of that early corporation tax relief being eroded by tax changes affecting the shares within the 10-year period.
All that is relevant only where the trust holds 10 per cent. of the ordinary share capital of the company, which it must do before it qualifies for the deduction, and the shares must be distributed to employees through the share incentive plan within the 10-year period.
With the addition of the new clause, the Bill will be better designed to encourage the flow of shares from the trust to individual employees over that period. It will thereby meet more fully the key objective of the Bill: to improve productivity by encouraging employees to take out a long-term stake in the company and share the rewards of the company's success. I congratulate my hon. Friend on negotiating the new clause. It satisfies the Treasury, which is no mean feat, as others who have failed in such matters will confirm.
We have heard how share incentive plans were introduced in 2000 after extensive consultation. Officials worked with an advisory group made up of representatives from large and small businesses, the TUC, share scheme experts and academics to design the plan, which has been well received.
Earlier, my hon. Friend the Member for West Bromwich, East (Mr. Watson) asked how the new clause might improve the number of those taking up the scheme. We know that almost 600 companies have already applied to set up plans, over half of which have formal approval from the Inland Revenue. The remaining plans are in the process of seeking that approval or are being worked on by the Revenue with the companies to ensure that they meet the legislative requirements and are therefore capable of approval.
The new clause, along with the other measures in the Bill that is set to come into force in April 2003, will add significantly to that number over time as people become familiar with the new possibilities. The growth in the sector is still modest, but I am sure that it is set to increase. The acorns that are being planted now will become saplings and perhaps, during the millennium, a veritable forest of trees will bear the fruits of the benefits that we all attribute to the potential of employee share ownership schemes today.
Mr. Michael Connarty (Falkirk, East): It gives me extreme pleasure to support the new clause in the name of my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) and to put on record my admiration for his consistent pursuit of positive but not extreme measures for the benefit of those in his constituency and throughout the United Kingdom. I also wish to put on record for the first time my great joy at the fact that he has eventually joined a number of us who served for many long and weary hours in local government under the previous Conservative Government, fighting the cause of the Scottish people.
The new clause is an excellent Government concession that extends the benefits under share incentive schemes to 10 years rather than two. Ten or 20 years ago I would not have viewed encouraging employees to share in the ownership, responsibility and benefits of successful enterprise as a positive move. I would rather have been seizing the commanding heights of the economy than sharing the benefits of such enterprise among its employees. But we have clearly moved on.
Many employees wish to be involved not just in the information and consultation processes that are coming from Europe but in the incentive of having a share in the capital of an enterprise and the benefits that flow therefrom. If the new clause were not to be approved, some of those benefits would be taken away by the requirement to pay capital gains tax and income tax at an early stage.
Mr. Love: Does my hon. Friend agree that because the Bill is specifically geared to substantial share ownership transfer, which will take a considerable time, without the new clause there would have been a significant disincentive as the trustees would have had imposed on them taxes that would have detracted from the transfer?
Mr. Connarty: My hon. Friend puts lucidly the benefits that flow from the new clause. The idea is to incentivise share ownership, and the removal of barriers to that, which have been revealed in Committee, will be beneficial, but we still have a long way to go.
I am a long-term member of the Co-operative party and the Co-operative Society and a former chairman of the Stirlingshire branch of the Co-operative party. Some older members had these ambitions in their early days
Mr. Connarty: I acknowledge my hon. Friend's intervention. We are remaking the co-operative ideal in introducing such Bills, and I commend my hon. Friend the Member for Edinburgh, North and Leith for that.
I hope that the new clause will be supported and will give people the incentive to take up these employee share schemes. It will probably be more difficult to find trustees than we think because they will have great responsibility. As we see in the credit unions movement, convincing people requires much work and is often a slow and arduous progress. The new clause will make it easier to convince people that this is a tax efficient and beneficial way to invest in an enterprise. If the tax man and the Government are willing to help, people will be enthused. I commend the new clause to the House.
Mr. Iain Luke (Dundee, East): As a co-sponsor with the hon. Member for West Ham (Mr. Banks), and one of the five Scots who added their name to the early-day motion, I am disappointed that we will not have the joy of a Bank holiday on 1 July. However, I should like to propose an amendment to that early-day motion to add "and Brazil", so that we have the best of both worlds.
I support the new clause. As a member of the Committee, which met for only a short time to consider the Bill, I am happy to see the new clause. It is evidence of the collaborative approach that we have witnessed to this small but worthwhile Bill. It is testimony to the thoughtful approach adopted by my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) and my hon. Friend the Paymaster General, who was particularly helpful. That approach demonstrated the Inland Revenue's commitment to making SIPsshare incentive planswork practically for the benefit of those who take them up. In that regard the measure should be commended. This is a small step. I am not a Co-op
Mr. David Lepper (Brighton, Pavilion): As we all know, the foundations of the co-operative movement were laid in my constituency in the 1820s and I commend to my hon. Friend membership of that movement. Does he agree that, welcome though the Treasury's co-operation is on the Bill and the new clause, once the Bill receives its Third Reading today, as we all hope that it will, the Government, the co-operative movement, the credit unions, and so on, will have an important job during the next few years in publicising the real merits of the Bill?
Mr. Luke: I pay tribute to my hon. Friend's commitment to the co-operative movement. When I was a young boy in Scotland, co-operatives were the only major form of retail store. I remember queueing up with my mother to put the book in the slot at the end of the week and the discount on one's goods that one got for doing so. In Dundee, we called it the "sosh" rather than the co-operative and social society.
My hon. Friend made a relevant point. Further co-operative and collaborative efforts are needed to bring the industry together and give employees a more vigorous say in how their workplace is operated, which is enhanced by the Bill and the SIPs options introduced in the 2000 Budget. It is worth making sure that people know about it, and we should advertise it more widely. Uptake is the big issueit needs to be greater than it has been.