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Mr. Flight: I congratulate the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz) on steering this Bill through successfully, and pay tribute to the speech by the hon. Member for West Bromwich, West (Mr. Bailey). Most hon. Members share the same ground. I thank the hon. Gentleman for his efforts over the past 20 years in promoting wider employee share ownership, and for his kind giving of credit to the efforts of the last Conservative Government.
The hon. Gentleman made the point about small and medium-sized companies, which the Bill is really all about, and which are the economic backbone of the country. Its application is reasonably limited and there is a separate issue as to how to achieve employee share ownership in larger quoted companies, as my hon. Friend the Member for Tunbridge Wells (Mr. Norman) did in his stewardship of Asda. I hope that he may have something to say on that subject in due course.
While I was pleased to hear from the Minister that the number of companies that have applied for SIPs is upto 330, I think she saidoverall it has been a bit slow going. As I understand it, the number of employees covered by employee share ownership plansESOPshas been fairly static for three years. The National Centre for Employee Ownership reported that about 8.5 million employees were beneficiaries of ESOPs and stock bonus plans in 2001, the same figure roughly as in 1998, so I hope that the Government will put their efforts where their mouth is and give employee share ownership a greater boost.
I am sorry that the Minister is not here. I would have hoped to hear her give a pledge that the John Lewis issue will be solved in another way. I am still not clear whether the Government's objection to the proposed provisions
I return to the theme of making it all succeed, so to speak. It is a powerful mixture of employees feeling part of the business, being involved in it, being involved in decision taking, having their hearts in it, feeling as if they are employee owners, which is my phrase; and businesses being well led.
The hon. Member for Edinburgh, North and Leith referred to the Baxi Trust. I remind hon. Members that the Baxi company, which is owned by an employee trust, has now become fairly commercial, having been somewhat unsuccessful as a result of fuzzy strategic thinking and not particularly good management. It is crucial for a company to have good, well-motivated management as well as involving the work force in the company.
Mr. Lazarowicz: I am grateful to the hon. Gentleman for giving way. Obviously, I am aware of the history of the Baxi Trust. Does he agree that although employee share ownership will not be suitable for all companies, it is more likely to produce the benefits that I highlighted in my speech.
Mr. Flight: Yes, that is axiomatic. However, there is a point to be made about employee share ownership. In my personal experience, we made widespread use of the approved share option scheme and it is quite mistaken that that remains limited to a maximum of £30,000, particularly for medium-sized companies that compete with large companies for top management, as we did. It afforded a way of paying regular salaries that were significantly below what top managers could obtain from a large competitor, but locking them into the business with the incentive of a significant equity upside if the business succeeded. It is well overdue that that figure should be reviewed and increased. I should point out that the last Conservative election manifesto included a commitment to increase it to £100,000 for companies with capitalisation up to £100 million. We are talking particularly about small and medium-sized companies that need to compete for good management but may not be able to pay for it on an ongoing basisand for locking them in likewise.
Without causing offence, I should say that one of the saddest commercial non-successes in my lifetime has been the co-operative movement. When I was a boy, my grandparents and parents participated actively, but the movement faded away because it was not a commercial success. Success requires good management as well as the co-operative spirit.
Mr. Bailey: Does the hon. Gentleman agree, however, that although some sectors of the co-operative movement have withered away, it is still a major organisation? It is the largest farmer in the country, a major retailer, one of
Mr. Flight: I did not wish to cause offence. I grant that the co-operative movement still has the opportunity to become a big success in some sectors. However, the hon. Gentleman would agree that in food retailing, for example, commercial supermarkets dominate the market and the Co-op missed a great opportunity. The formula for success includes employees feeling that they are part of the business and able management who potentially have a larger ownership stake in it.
The hon. Member for Edmonton (Mr. Love) felt that employee share ownership had been damaged by privatisation. The majority of privatised utilities have been successful and their employees have shares in the business. Some have sold them, but a hell of a lot have not and are happy with the situation. However, recent events have been damaging. Hon. Members will recall that Railtrack employees used their dividends to invest in more shares just a few days before Railtrack was put into administration and it is increasingly apparent that the intent of the then Minister was to do just that. I have raised the matter with the Financial Services Authority because, under normal circumstances, that would have been an offence under the Financial Services and Markets Act 2000. The FSA is of the questionable legal view that Ministers have Crown immunity, but the Government should remember that in the privatised utilities sector huge numbers of staff are share owners as well as being involved in pension schemes and so on, and if there is no legal obligation to act in accordance with the Financial Services and Markets Act there is jolly well a moral obligation so to do.
Mr. Lazarowicz: Does the hon. Gentleman agree that the real lesson of the Railtrack experience as far as employee share ownership is concerned is that had employees been given more shares earlier on and been able to deal on a collective basis, they might have had more influence on the management of Railtrack and therefore its direction, and life could have been very different?
Mr. Flight: I know that you will stop me very quickly, Mr. Deputy Speaker, if I go on for more than a second in response to that question. There was significant employee share ownership. In essence, the problem with Railtrack affects the whole public-private partnership structure in which businesses have safety requirements and depend on subsidies from central Government, and there is sometimes a lack of clarity about their obligations. Time will tell, but the biggest issue about Railtrack was that the management responded to Hatfield with massive expenditure and effort which eventually led to the Government being able to put the company into administration. However, that is an aside.
My main point is that there is plenty of employee share ownership within the privatised utilities. Most of it has been successful and has made employees much more active participants in their operations. Would there were a way within the public sector to achieve the same participation that employee share ownership has brought and can bring within the private sector.
In conclusion, I welcome the Bill and repeat my request to the Government to say whether or not they will find a way of sorting out the Peter Jones, or rather John Lewis issuehon. Members can tell which I preferwhich in part the Bill was about. In fairness, it would be a great pity if the Bill were on the statute book and the Peter Jones situation remained unresolved.
Mr. Iain Luke (Dundee, East): I rise as I did on Second Reading to support the Bill into which my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) has put a great deal of effort to get the provisions contained in this slim document into law. I pay tribute to the way in which he and his staff have handled the Bill. Having shared an office with him, I know that he has worked extremely hard. I also gained a unique insight into what goes into presenting, preparing and promoting a private Member's Bill. It is my fervent hope that there will be a successful conclusion to his efforts and that, when the Bill becomes law, it will benefit those to whom its clauses seek to extend the possibility of profiting from the share scheme option.
As a new Member, I found the process instructive, educational and profoundly satisfying. In observing the progress of this Bill, participating in its brief Committee stage and serving on the Standing Committee considering the Finance Bill, which will conclude next week, I have been privileged to participate in Treasury law making in detail and in the round, and I have benefited from being able to see the bigger picture. Although the proposals are detailed and technical, the Bill has underlined for me how Parliament can have a beneficial impact on the lives of the ordinary people throughout the country whom we represent, as has being able to view at close quarters the help that my hon. Friend received from officials of the Inland Revenue and the Treasury, and from Ministers.
It has been uplifting to witness the official Opposition playing such a constructive part in supporting the Bill's principles and making pertinent and sound comment on how the detailed proposals could be improved. I have seen more evidence of that attitude from the hon. Member for Arundel and South Downs (Mr. Flight) during his excellent contributions on the Finance Bill, although there is one point that I want to take up with him. He says that companies such as his aim for profit, but he will surely agree that companies can have a range of different objectives, which often means that companies give up profit to satisfy social objectives. The hon. Member for Twickenham (Dr. Cable) mentioned his employment with Shell, a company that spends a lot of money on ensuring that the environmental issues that confront it are dealt with properly.