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Mr. Love: Do not forget the Fenwick weavers.
Mr. Lazarowicz: Indeed. My hon. Friend reminds me of the movement's Scottish history. I am also grateful to my hon. Friend the Member for Dundee, East (Mr. Luke) for explaining the derivation of the term "sosh" for a co-operative movement in Dundee. I was aware of the term, but not of the derivation, so I thank him for that illumination.
Although the co-operative movement has that long, proud history, it is hardly a secret and it must be admitted that success has not, in recent decades—
Mr. Deputy Speaker: Order. Third Reading debates are about the content of a Bill. Diverting though this history may be, the hon. Gentleman is straying outside the rules of order.
Mr. Lazarowicz: I apologise for straying from the subject, Mr. Deputy Speaker, and I shall draw my remarks to a close.
The Bill seeks to link the employee share ownership movement and a host of other initiatives such as the profit motive, social commitment and consumer interest to encourage economic efficiency and support for business as well as support for building strong communities, especially in areas that have suffered from economic deprivation over the years. As was said many times on Second Reading, this is a movement whose time has come.
I congratulate the Government on responding to those calls by taking employee ownership further forward through their backing of the measure, and I thank those Members who are present today. I urge the House to support the Bill on Third Reading.
11.8 am
Dr. Vincent Cable (Twickenham): I want to add a few words of support for the Bill and warmly congratulate the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz), who introduced it, on getting so far. I am taking a private Member's Bill through the House and although I have not so far been troubled by amendments, let alone perilous negotiations with the Treasury, I know from my more limited experience how difficult it is.
I strongly support the principles underlying the Bill. It tends to be forgotten that the principles of employee share ownership are long-standing, but over the years it has been difficult for them to progress. I was born and brought up in the city of York, and my parents started their working lives on the shop floor—my father at Rowntree's and my mother at Terry's. Those liberal, Quaker-owned companies believed passionately in the principle of employee share ownership—getting the divvy was a major feature of the life of many working families in the city, as it often financed the annual holiday—and it created a distinctive approach to business.
There were few strikes, if any, despite the difficulties in changing manning systems and industrial structures, which would have created conflicts in other environments, and there was a wider impact in that the companies were
much more socially responsible. We try to legislate for social responsibility, but it was embedded in those companies' values.Sadly, many of those companies have found it difficult to progress. The two in York were taken over many years ago, as the families were unable to retain ownership. Much of the idealism was lost, and the system wound down. Relatively few companies—I think Clarks Shoes is one of the few that continues—have been able to maintain those values on the back of a committed family owner. One of the lessons to be learned is that, if employee share ownership is to be sustained and grow, it must be embedded much more securely and not depend on the enlightened attitudes of one or two owners. It must be embedded in the system of corporate governance and in the tax system.
Share options are widely used to incentivise senior management. Some big companies have operated share ownership schemes with some success. Before coming to the House I was with Shell, which offered one of the more imaginative schemes that worked. The fact that the shares outperformed the FTSE for many years was a major incentive for people to join the company and to stay with it. People in the company understood the problems of the accounts. When it got into some difficulties in the 1990s and needed major restructuring, there was probably more understanding of what management had to do than there would have been had the employees not had a stake in the ownership.
Such schemes do work, so it is frustrating and disappointing that employee share ownership has not spread more. I welcome the initiatives that have been taken, initially by Lord Lawson and then by this Government, whose recent share incentive plan is a positive step forward. However, those initiatives are limited, and the value of the Bill is that it takes a few extra steps in opening up the share incentive plan to a wider group of people and companies. I am sure that the hon. Member for Edinburgh, North and Leith would acknowledge that the Bill is not revolutionary, because it does not make massive changes, but it represents a welcome increment.
As the hon. Gentleman said in his closing remarks, the Bill gives a small boost to mutuality. In the early and mid-1990s, the mutual movement was in retreat, but the position has been stabilised. The hon. Member for Edmonton (Mr. Love) has played a major part in that by pointing the way to practical initiatives that can be taken to strengthen mutual ownership. This Bill and the measure promoted by the hon. Member for Harrow, West (Mr. Thomas) are good, practical ways of making mutual ownership worth while.
Like the hon. Member for Edinburgh, North and Leith, I am disappointed that the problems of the John Lewis Partnership have not been addressed. My constituency draws heavily on the John Lewis Partnership. Our big retail department store across the river in Kingston is John Lewis, and in the past three years the town centre of Twickenham has been transformed by Waitrose, which has made a success of a store that defeated all the other supermarkets chains that tried it. We have satisfied customers and committed employees, who have lobbied me to see whether we can break this problem with the share incentive plan and its relationship to trust-owned companies. I am disappointed that that has not happened,
but the language from Treasury Ministers gives some encouragement. I shall take that back in a positive spirit, and I hope that it is followed through.I should like to register my strong support for the Bill, and I congratulate the hon. Member for Edinburgh, North and Leith. I hope that the Bill completes its passage through the House.
11.13 am
Mr. Adrian Bailey (West Bromwich, West): My association with the co-operative movement has been declared on many occasions in this Chamber. I was employed by the co-operative movement for many years. I have long been an evangelist for the principles that are embodied in the Bill.
I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on introducing the Bill, and on piloting it through the labyrinthine processes that are necessary for a private Member's Bill to be successful. In doing so, he has had to work with the Treasury and get its acceptance of the implications of some of the clauses. That is no mean achievement for any Back Bencher, but for a new Back Bencher it is a significant success. The Bill shows that, even in these so-called cynical times of business management, it is still possible for a Back-Bench Member of Parliament to introduce significant legislation.
The Bill is simple in principle, but complex in practice. When I read the explanatory notes on the clauses, I wished that there were explanatory notes to explain the explanatory notes. In spite of those complications, which were lucidly explained by my hon. Friend, parties have been signed up to this simple principle for a number of years; it is the recognition that, to get the best out of employees, they have to have a stake in their company. That stake should not be confined to the payment of wages for their weekly work, but should involve a mechanism that enables them to benefit from the capital growth in the company to which they are committed.
There is also considerable evidence to show that when that stake is extended and employees have some say in the management of the company, its productivity, output and growth are even better. I am old enough to remember the days in the 1960s and 1970s when industry was dominated by an "us and them" attitude—the underlying belief that the interests of ownership and labour were irreconcilable. We all know what impact that had on British industry, and the reputation that this country had for strikes, low productivity and low economic growth. The Bill reflects the change in culture that has taken place since then, and it promotes a change in culture that few of us would have dreamed of 10 or 15 years ago.
On Second Reading, it was interesting how many Members read out letters from employees of the John Lewis Partnership—a company oft cited in this debate—and other companies that have adopted such management structures, principles and ownership. There could not be a clearer demonstration of enhanced commitment than that shown by those employees to their company. Many employees of the John Lewis Partnership who wrote to us recognised that, even though the Bill may not in the end be relevant to their specific interests—and irrespective of their own self-interest—their work and experience in the company encourage them to believe that this practice is good for everyone and should be promoted.
The problem is that, for far too long, companies such as the John Lewis Partnership and Scott Bader have been regarded as little models of a different culture within industry, and looked upon almost as oddities and not part of the industrial norm in our economy. Too few owners of businesses, employees and trade unions have been prepared to consider the culture that has developed in those companies to see what relevance it has for other industries. That has been changing. I compliment the former Tory Government on beginning to adopt that process, and particularly the current Government on the way in which they have developed it. I see this legislation as—I was going to say the culmination but I hope that it will not be the culmination of the process. I hope that future legislation will do even more, but the Bill is certainly a major step towards improving the culture in industry and promoting democratic participation and management, with all the economic benefits that go with it.
My hon. Friend the Member for Edinburgh, North and Leith went into some detail about the surveys on companies that adopt these particular principles and the economic benefits that have been derived. I will not go into them in detail, but in the United States, where employee share ownership is quite widespread, there has been a lot of research and all the indications are that there are marginal improvements in productivity when employees have just a capital stake in the company, and significant improvements in productivity when they have both a capital stake and some say in the management of that company. Studies both in Europe and in the United Kingdom substantiate the findings in the United States.
This is one of those rare Bills that benefits everyone. There are advantages for all. There are advantages for employers in gaining upfront tax incentives to put money into trusts for the purchase of shares for employees. I think that by now they can be confident that improved commitment, productivity and output will be generated as a result of this Bill.
The Bill provides an incentive for employees because they know that, by working within this structure and being part of it, their benefits from the company are not limited to the wages that they get at the end of the week. They know that if they do that little bit extra and come up with ideas that may be adopted, in the long term, they will share in the benefit to the company that will accrue. That is obviously part of the underlying reason why such companies have done so well.
The Bill also gives employees a share in the challenges that a company faces—the market—and the problems that have to be worked through in any successful company. It gives them confidence and an insight into investment. No longer will people regard themselves just as employees who spend their money and play no part in the capital wealth-creating process of industry. They will be part of it, and they can use the experience that they gain in other areas to invest in other ways.
Above all, the Government, the country and the economy will benefit from the surge in productivity which, on all the evidence that we have, should take place as a result of this measure. I am told that we are in advance of our European neighbours. I hope that, arising from this legislation, schemes will be adopted elsewhere, and we will see the benefit feeding through into our economic performance, which will benefit everyone.
I hope that the Bill marks a surge in this type of ownership. A number of people have raised the issue of how we advertise it and get companies to sign up to it. I was encouraged by the figures provided by the Minister, which show that 45 per cent. of share incentive plans were from small and medium-sized enterprises. In constituencies such as mine of West Bromwich, West, the huge major employers have disappeared. The backbone of the economy in West Bromwich is small and medium-sized enterprises. Indeed, if we look at the proportion of the national product generated by them, we realise that it is very high. With this legislation being so beneficial and relevant to smaller businesses, I hope that it will have a disproportionate effect on output in that particular sector.
There are big issues of how to enlighten local companies about the potential benefits that will accrue from the legislation. Members of Parliament have an important role to play in their day-to-day contact with companies. The Government have an important role to play in promoting it. Those among us with business contacts must also play their part.
I have campaigned for 20 years for the adoption of principles such as are embodied in the Bill. It is a major step forward. I am pleased that there appears to be a high degree of cross-party support for it. I hope that everyone will go out to ensure that it is translated into real benefits for our industrial structure, and that the whole economy benefits as a result.
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