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11.55 am

Mr. Archie Norman (Tunbridge Wells): I cannot resist taking this opportunity to add my congratulations to the hon. Member for Edinburgh, North and Leith

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(Mr. Lazarowicz) on promoting the Bill and steering it through all its stages in the House. Unfortunately, I could not be here for Second Reading, but he has demonstrated an outstanding grasp of the subject, and it is no doubt largely because of his perseverance and skill that we have arrived at a highly satisfactory and consensual resolution today. I also congratulate the organisations that have contributed to the Bill's success, through skilful lobbying.

I want to place it on the record that I have been an active practitioner of wide-scale employee share ownership. I would like to think that, when the hon. Member for Dundee, East (Mr. Luke) referred to me—I think it was me—as the less acceptable face of capitalism, he was doing me a minor injustice, but I shall take his remarks in the humorous way in which they were intended.

When I was chairman and chief executive of Asda, which is a much larger company than those that will benefit from the Bill but which provides an interesting example, we sought to change the whole ethos of the business, and one part of that process was creating a very large employee share ownership trust, which made shares available to more than 65,000 employees. I think that it ended up as the largest employee share ownership trust of its kind in Britain at that time. The benefits were substantial.

The effect of such share ownership schemes is entirely a function of the extent to which they rhyme with everything else that the management do and the way in which the company is run. Simply distributing share benefits to employees, particularly in an organisation such as Asda, which employs a very large number of part-time working women and so on, will have no effect whatever unless people are invited into the management process as well. One needs to create a culture in which ownership is part of the way of life and of the workplace community. We set out to achieve that, although this is not the time or place in which to say how that was done. However, we had the biggest employee suggestion scheme in Britain for five years—we received more than 40,000 suggestions—which suggests what sort of organisation has to be in place.

I congratulate the hon. Member for Edinburgh, North and Leith on introducing a Bill that is part of a broader change in approach to management in this country, which, as many other hon. Members have said, is leading other countries in western Europe. It reflects the fact that most good employers recognise that employees no longer come to work simply to earn a daily crust but because they want to do something worthwhile and belong to a socially responsible organisation that is seeking to help them achieve that and is prepared to listen to what they say. Their contribution is far broader than their immediate job definition within the organisation and helps to create a single-status business culture in which everyone is equally valued regardless of their role. Obviously, we recognise that people are paid differently and perform different roles, but that does not mean that they are not equally valued and respected for their worth and contribution to the company.

That is a much broader set of changes than some hon. Members have acknowledged. I accept the points that they made about the co-operative movement, which in some respects is a forerunner of share schemes and parts of which remain successful. Hon. Members also referred to mutual organisations, one of which, the Tunbridge Wells

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Equitable, started out successfully in my constituency. Mutual organisations, too, partly reflect the ethos of the Bill. Fundamentally, however, we are looking at a change in attitudes to management in the boardroom and share schemes are part and parcel of helping to facilitate that cultural change. The more that we can push those ideas and that management approach and encourage smaller companies, industrial companies and so on to adopt them, the better.

As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, there is no reason why share schemes should apply just to white collar employees in the financial services and so on. At Asda, most of the people whom we employ are part-time working women who have come back to work after bringing up a family; some of them are in their first job ever. Of course, we recognise that such employees are not well versed in the nature of the balance sheet, earnings per share and so on, but there is no reason why the company cannot make an effort to explain the relationship between financial performance and employee benefits. Such schemes require the company to do that and encourage that virtuous circle.

I welcome the idea that has been built into the Bill that employees can be trustees of share ownership trusts, which helps to bring employees into the management process and encourages feedback and involvement. The hon. Member for Dundee, East made a good point about public services. There is no reason why the idea behind share ownership cannot be extended to public service organisations. In fact, because they are often vocational in nature, they are susceptible to higher levels of employee ownership. A former colleague who is now chairman of the Royal Mail or Consignia has talked about introducing a shadow share scheme for Royal Mail employees, which may be a pioneering example of the way in which such schemes can be extended to the public services.

Finally, I welcome the Bill, which has tremendous support on both sides of the House and outside. However, a number of hon. Members believe that it should not be the final step in the process. I hope that, after today, the Minister will consider what more can be done to extend share ownership to accommodate the John Lewis point, which has been made on a number of occasions. It would be very sad after all the efforts that that organisation has made and its support for the process if it were left out in the cold. We also need to consider whether we can extend the benefits in the Bill to larger as well as smaller companies. Several hon. Members rightly said that small businesses are the backbone of their constituencies and, in many ways, the economy, but the 10 per cent. requirement effectively precludes such schemes from applying to larger companies with a high-value total shareholding.

There are changes to be made, but they are a matter for another time. We should extend the proposals so that large public companies in Britain such as Asda could benefit if encouraged to adopt such schemes. There would be other benefits too—not just employee motivation, but changes in attitude to boardroom pay. However, the Bill is welcome and the hon. Member for Edinburgh, North and Leith has done terrific work. I support the Bill completely as does everyone in the House. I hope that we can go on to consider what further steps can be taken in the same spirit.

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12.4 pm

Ann McKechin (Glasgow, Maryhill): I support my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) in his bid to secure this important Bill. The measure will play an important part in strengthening and extending the concept of mutual and co-operative ownership in all types of businesses, and will encourage a constructive partnership between employers and employees. The Bill shows the increasing sophistication of the mutual and co-operative principle.

Like many hon. Members, I am sure that our earliest memories of co-operative ownership are as children visiting co-op stores in our local towns and villages, and learning about the mysterious concept of the divi and, more importantly, the ability to quote one's divi number as readily as one's own date of birth. The basic principles and benefits of shared ownership could be readily understood by children barely of school age.

I was brought up in Paisley, a town steeped in the principles of co-operative ownership. We had co-op grocers, co-op butchers and co-op chemist shops, not forgetting the Co-op's ability to look after us from beyond the grave. In Paisley we even benefited from two full Co-op department stores, which both survived for a good number of years, even though they faced each other in the same street. One belonged to the Paisley Co-operative Wholesale Society and the other to the Paisley Co-operative Manufacturing Society. In a town famous for having a church to represent every schism of the Protestant faith, it is hardly surprising that for a very long time the community could support different retail co-operatives.

The reason those shops survived is that so many people, particularly the less well-off, depended on them and put their trust in them to assist in their basic requirements. No private organisation would ever be able to enjoy such a continued level of community support and trust. As the years have passed, the co-operative organisations have had to show increased management skills, innovation and technical expertise to allow them to survive in a complex and competitive environment. The remarkable transformation of the Co-operative bank in the past 10 years is just one example of how co-operatives can compete with large multinationals in the tough financial services market.

Despite those changes, the principle of shared ownership remains at the heart of co-operatives' enterprise. That concept of ownership deserves a strong and permanent place in our society, to ensure choice for consumers and to provide strong links with local communities and a different way of working which avoids the old-style class base.

For 10 years before I entered Parliament, I worked as a staff partner in a legal firm, which had about 40 employees when I left. Because of the specific nature of our work, no other form of ownership was available. There are obviously freedoms attached to partnership ownership, but there were also drawbacks. Many of our staff had skills that were in high demand, so staff retention was a permanent issue, particularly with a business growing year on year. We had no direct mechanism to offer them a real share in the business, which I believe would have acted as a substantial incentive to them to remain as long-term workers in the firm.

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The use of annual salary increases or a one-off bonus does not have the same direct effect, when an employee is often not aware of the level of profit generated in a business. Shared ownership would also have changed the employer/employee relationship to allow a greater degree of consultation and a better spread of responsibility, making possible a greater appreciation on either side of the work of the other. The results would give a higher level of productivity, along with an improvement in staff retention and staff morale.

Even in today's world, with the increasing presence of powerful multinational companies that are often wealthier than entire nation states, many people are looking to the concept of mutuality and shared ownership to provide a new way forward that is more flexible and responsive to their wishes for a more satisfying form of work, allowing them to contribute, often in new and innovative ways, to the fortunes of the organisation for which they work, as well as having a direct share in the rewards.

For partnership to deliver, it must be genuine. We as parliamentarians need to put in place the appropriate structures to ensure that partnerships are demonstrably real and equal. Collective shareholder trusts could signify a shared interest in the long-term success of the enterprise, while providing a collective voice at boardroom level for the members of such a trust—namely, the employees who generate wealth for the company.

This small but important piece of legislation will, I hope, significantly increase the attractiveness of employee share schemes, particularly for smaller companies where the current heavy administrative costs in forming a mutual ownership structure can be a strong disincentive.

Figures from a recent EU study showed that the organisations most likely to have some form of financial participation by employees are larger companies, as the hon. Member for Tunbridge Wells (Mr. Norman) said, with more than 5,000 employees, usually through the narrow-based schemes open to only a relatively small minority of workers, and firms with a high proportion of white collar workers.

I am certain that the principles of mutual ownership could be extended further to reach small and medium-sized enterprises, which form the bulk of employment opportunities in Britain and which, in many instances, are ideally suited to this type of scheme.

Take, for example, the small family-owned firm whose owners wish to devote less time to the day-to-day running of the operation, perhaps because they are retiring or want to work part time. This type of scheme offers a method of retaining a strong interest in their original enterprise while handing over more of the control and responsibility to their staff, thereby giving the company the advantage of continuity and stability, both internally and to their market and financiers.

By providing corporation tax relief up front for share distribution into an employee share ownership trust, and making it easier for employee trusts to elect employees as trustees, thereby encouraging a direct say in management and ownership for employees, the Bill goes a substantial way towards achieving the Government's ambition to double shared ownership. As many are aware, employee shared ownership is widespread in the United States, in

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some cases involving large organisations with global markets, particularly in agriculture. A good example of that is Ocean Spray, the major exporter of cranberry juice. I believe that the cranberry is the United States only indigenous domestic fruit.

On a vacation a few years ago, I do not say that I was forced to, but I visited Ocean Spray's cranberry museum in New England where not only does one receive a full tour of the various agricultural methods used in harvesting the crop and its range of products, but one is made aware of its proud history of shared ownership and the success that that has brought the company. It is viewed as its strength and one of the main reasons why it has achieved a consistently high quality product, recognised throughout the world and able to compete in an aggressive market and to export world wide. Each of the farmer producers has a direct share in the future of the business.

Most of the recent research on such organisations in the United States has shown that this type of ownership, crucially combined with other means of active employee participation, has a positive impact on productivity and corporate performance. Such structures promote stability and encourage good working relationships by combating short-termism in management decision making.

As well as congratulating my hon. Friend the Member for Edinburgh, North and Leith—he has just left the Chamber, I am sure temporarily—on introducing the measure, the Government should also be commended on their support for the Bill and their encouragement of shared ownership, particularly in giving corporation tax relief up front and the share incentive plan introduced previously, providing important and essential financial assistance for greater flexibility in ownership structures. The new clause is accordingly welcome and I trust that the Bill will receive the support of the House today.

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