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Mr. Bercow: Will the right hon. Lady give way?
Dawn Primarolo: Not at the moment.
Mr. Bercow: I was going to be helpful.
Dawn Primarolo: I thank the hon. Gentleman but I can manage under my own steam at the moment. Should I need his help, I shall certainly call on him.
The further changes proposed will modernise company share option plans and ensure that they continue to be attractive vehicles for employers wanting to encourage employees to take a stake in their company. That package of improvements is further evidence of the Government's continuing support for companies that offer employee share schemes. The changes result from listening to and working with practitioners. Indeed, ProShare, the organisation that exists to promote share ownership, has already signalled its appreciation of most of the changes.
The hon. Member for Arundel and South Downs raised a number of questions about the national insurance charge. The Government believe that employers should pay their fair share of national insurance on all forms of employment-related remuneration. While the majority of employees and employers undertake their tax responsibilities diligently, there remains a small but, unfortunately, significant group that seeks to avoid paying tax and national insurance contributions on employment remuneration. The change means that companies that seek to avoid paying national insurance can no longer do so. Employers face an employer's national insurance charge only if the options that they have awarded are capable of being exercised within three years of grant. Employees exercising their company share options within the three years of grant will be able to do so tax and national insurance-free. That means that employers who have been using company share option plans as intended—that is, to encourage employees to take a long-term stake in the company that they work for—will not be affected by the changes.
We have also been careful to protect employers from the employer's national insurance charge when employees have to exercise their option within three years. That relates to the point that I made earlier about employees being forced to exercise their options. It is a matter for companies and employees to make provisions and arrangements for the recovery of any PAYE and national insurance contributions from employees who exercise early and have a tax liability.
The hon. Member for Arundel and South Downs also raised some issues about PAYE and asked whether the measure was retrospective. The charge arises if employees exercise their option after 9 April 2003 and within three years of grant. If employees exercise their option in those circumstances, they do so in the full
knowledge of the tax and national insurance charge that will arise—that is, on the basis of the law as it applies on exercise. That change will not prevent employees from exercising early for commercial reasons. They will simply make the decision taking into account the tax and national insurance to be paid. A company share option plan is designed so that employees can take a long-term stake in the company that they work for. If employees keep their options for at least three years after grant, they can be exercised tax and national insurance-free.
Mr. Bercow: Will the right hon. Lady give way?
The hon. Member for Arundel and South Downs also raised the issue of tackling avoidance using company share option plans, and the question of leavers. Failure to tackle avoidance would continue to undermine the share schemes that aim to incentivise employees, and he well knows that. As I made clear in my speech on Second Reading, measures to counter tax and national insurance avoidance would not damage business or investment in the City. On the contrary, this is about creating a level playing field by ensuring that a small number of businesses can no longer gain an unfair advantage over their competitors by avoiding their national insurance and tax contributions. We estimate that the tax and national insurance that will be protected by these changes will be in the region of £55 million in 2003–04, and between £30 million and £35 million in subsequent years. Employees who have to exercise their options within three years of grant because they have lost their job or for other reasons will be protected. In that way, we protect the innocent and stop the avoiders.
Mr. Bercow: The Paymaster General began by appearing to lament the phenomenon of early exercise, but was then gracious enough to concede that there were circumstances in which employees would have no reasonable alternative but to exercise that option. Now that she has, with prescience, anticipated precisely the redundancy scenario that I was intending to depict for her, will she tell the Committee whether the loss of job to which she has just referred would also apply to circumstances such as the termination of employment unrelated to redundancy?
3.30 pm
Dawn Primarolo: To be perfectly honest, I do not think that I understand the hon. Gentleman's question.
Mr. Bercow: Will the right hon. Lady give way?
Dawn Primarolo: I am spoilt for choice. Who will help me first? I shall ask the hon. Gentleman to repeat his question.
Mr. Bercow: I am genuinely grateful to the right hon. Lady. She was being slightly churlish a few moments ago, because I had intended to compliment her on the intellectual osmosis that seemed to exist between us when she anticipated what I was proposing to say. I am
not trying to be clever or unhelpful—that would be difficult for me—but simply asking whether the concession applies when someone is sacked, as opposed to being made redundant.
Dawn Primarolo: I clearly was not hanging on the hon. Gentleman's every word and listening as carefully as I usually do. The answer is no.
The final point, to which the hon. Member for Arundel and South Downs and others have referred, not just in today's debate, and which is of concern elsewhere, relates to the International Accounting Standards Board's proposals. He will appreciate that its proposals for share schemes are not a Government initiative, and while the accountancy proposals are being developed, it would be inappropriate for the Government to become directly involved in the debate. However, I think that I have made it clear, as the hon. Gentleman certainly has, that we are committed to employee share schemes and continue to pursue a course that enables them to develop and benefit not only employees but the companies as well, and I hope that nothing will be done in future that would undermine that.
I commend the clause to the Committee and look forward to the debate on the schedule.
Question put, That the clause stand part of the Bill:—
The Committee divided: Ayes 291, Noes 135.
AYES
Abbott, Ms Diane
Adams, Irene (Paisley N)
Ainger, Nick
Ainsworth, Bob (Cov'try NE)
Alexander, Douglas
Allen, Graham
Anderson, Janet (Rossendale & Darwen)
Armstrong, rh Ms Hilary
Atkins, Charlotte
Austin, John
Bailey, Adrian
Baird, Vera
Banks, Tony
Barnes, Harry
Barron, rh Kevin
Battle, John
Bayley, Hugh
Beard, Nigel
Beckett, rh Margaret
Beggs, Roy (E Antrim)
Benn, Hilary
Bennett, Andrew
Benton, Joe (Bootle)
Betts, Clive
Blackman, Liz
Blears, Ms Hazel
Blizzard, Bob
Boateng, rh Paul
Borrow, David
Bradley, rh Keith (Withington)
Bradley, Peter (The Wrekin)
Bradshaw, Ben
Brennan, Kevin
Brown, Russell (Dumfries)
Browne, Desmond
Bryant, Chris
Burgon, Colin
Burnham, Andy
Byers, rh Stephen
Cairns, David
Campbell, Alan (Tynemouth)
Campbell, Ronnie (Blyth V)
Casale, Roger
Challen, Colin
Chapman, Ben (Wirral S)
Chaytor, David
Clapham, Michael
Clark, Mrs Helen (Peterborough)
Clark, Dr. Lynda (Edinburgh Pentlands)
Clarke, rh Tom (Coatbridge & Chryston)
Clarke, Tony (Northampton S)
Clelland, David
Clwyd, Ann (Cynon V)
Coaker, Vernon
Coffey, Ms Ann
Coleman, Iain
Colman, Tony
Cooper, Yvette
Cousins, Jim
Crausby, David
Cruddas, Jon
Cryer, Ann (Keighley)
Cryer, John (Hornchurch)
Cummings, John
Cunningham, Tony (Workington)
Curtis-Thomas, Mrs Claire
Darling, rh Alistair
Davey, Valerie (Bristol W)
David, Wayne
Davidson, Ian
Davies, rh Denzil (Llanelli)
Davies, Geraint (Croydon C)
Davis, rh Terry (B'ham Hodge H)
Dawson, Hilton
Dean, Mrs Janet
Denham, rh John
Dhanda, Parmjit
Dobson, rh Frank
Doran, Frank
Dowd, Jim (Lewisham W)
Drew, David (Stroud)
Eagle, Angela (Wallasey)
Eagle, Maria (L'pool Garston)
Efford, Clive
Ennis, Jeff (Barnsley E)
Etherington, Bill
Ewing, Annabelle
Farrelly, Paul
Field, rh Frank (Birkenhead)
Fisher, Mark
Fitzpatrick, Jim
Flint, Caroline
Flynn, Paul (Newport W)
Follett, Barbara
Foster, rh Derek
Foster, Michael (Worcester)
Foulkes, rh George
Francis, Dr. Hywel
Gardiner, Barry
Gerrard, Neil
Gilroy, Linda
Goggins, Paul
Griffiths, Jane (Reading E)
Griffiths, Nigel (Edinburgh S)
Griffiths, Win (Bridgend)
Grogan, John
Hall, Mike (Weaver Vale)
Hall, Patrick (Bedford)
Hamilton, David (Midlothian)
Hamilton, Fabian (Leeds NE)
Hanson, David
Harris, Tom (Glasgow Cathcart)
Havard, Dai (Merthyr Tydfil & Rhymney)
Healey, John
Henderson, Doug (Newcastle N)
Henderson, Ivan (Harwich)
Hendrick, Mark
Heppell, John
Hermon, Lady
Hesford, Stephen
Heyes, David
Hill, Keith (Streatham)
Hinchliffe, David
Hodge, Margaret
Hoey, Kate (Vauxhall)
Hood, Jimmy (Clydesdale)
Hoon, rh Geoffrey
Hope, Phil (Corby)
Howarth, George (Knowsley N & Sefton E)
Howells, Dr. Kim
Hughes, Kevin (Doncaster N)
Hurst, Alan (Braintree)
Hutton, rh John
Irranca-Davies, Huw
Jackson, Glenda (Hampstead & Highgate)
Jackson, Helen (Hillsborough)
Jamieson, David
Jenkins, Brian
Johnson, Alan (Hull W)
Johnson, Miss Melanie (Welwyn Hatfield)
Jones, Jon Owen (Cardiff C)
Jones, Lynne (Selly Oak)
Jowell, rh Tessa
Joyce, Eric (Falkirk W)
Kaufman, rh Gerald
Keen, Alan (Feltham)
Keen, Ann (Brentford)
Kemp, Fraser
Khabra, Piara S.
Kidney, David
Kilfoyle, Peter
King, Andy (Rugby)
King, Ms Oona (Bethnal Green & Bow)
Knight, Jim (S Dorset)
Ladyman, Dr. Stephen
Lammy, David
Laxton, Bob (Derby N)
Lazarowicz, Mark
Lepper, David
Leslie, Christopher
Levitt, Tom (High Peak)
Lewis, Ivan (Bury S)
Liddell, rh Mrs Helen
Linton, Martin
Lloyd, Tony (Manchester C)
Love, Andrew
Lucas, Ian (Wrexham)
Luke, Iain (Dundee E)
Lyons, John (Strathkelvin)
McAvoy, Thomas
McCabe, Stephen
McCartney, rh Ian
MacDonald, Calum
MacDougall, John
McFall, John
McGuire, Mrs Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
Mactaggart, Fiona
McWalter, Tony
Mahon, Mrs Alice
Mallaber, Judy
Mann, John (Bassetlaw)
Marsden, Gordon (Blackpool S)
Marshall, Jim (Leicester S)
Martlew, Eric
Meale, Alan (Mansfield)
Merron, Gillian
Michael, rh Alun
Miliband, David
Miller, Andrew
Mitchell, Austin (Gt Grimsby)
Moffatt, Laura
Mole, Chris
Moonie, Dr. Lewis
Morley, Elliot
Mountford, Kali
Mudie, George
Mullin, Chris
Murphy, Denis (Wansbeck)
Naysmith, Dr. Doug
Norris, Dan (Wansdyke)
O'Brien, Bill (Normanton)
O'Hara, Edward
Olner, Bill
Organ, Diana
Owen, Albert
Palmer, Dr. Nick
Picking, Anne
Pickthall, Colin
Plaskitt, James
Pollard, Kerry
Pond, Chris (Gravesham)
Pound, Stephen
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Prescott, rh John
Price, Adam (E Carmarthen & Dinefwr)
Primarolo, rh Dawn
Prosser, Gwyn
Purnell, James
Rapson, Syd (Portsmouth N)
Raynsford, rh Nick
Reed, Andy (Loughborough)
Reid, rh Dr. John (Hamilton N & Bellshill)
Robertson, Angus (Moray)
Robertson, John (Glasgow Anniesland)
Robinson, Geoffrey (Coventry NW)
Rooney, Terry
Ross, Ernie (Dundee W)
Roy, Frank (Motherwell)
Ruane, Chris
Ruddock, Joan
Russell, Ms Christine (City of Chester)
Ryan, Joan (Enfield N)
Salmond, Alex
Sarwar, Mohammad
Savidge, Malcolm
Shaw, Jonathan
Sheerman, Barry
Sheridan, Jim
Shipley, Ms Debra
Simon, Siôn (B'ham Erdington)
Singh, Marsha
Smith, rh Chris (Islington S & Finsbury)
Smith, John (Glamorgan)
Smith, Llew (Blaenau Gwent)
Smyth, Rev. Martin (Belfast S)
Soley, Clive
Southworth, Helen
Spellar, rh John
Squire, Rachel
Starkey, Dr. Phyllis
Stinchcombe, Paul
Sutcliffe, Gerry
Tami, Mark (Alyn)
Taylor, Dari (Stockton S)
Taylor, David (NW Leics)
Taylor, Dr. Richard (Wyre F)
Thomas, Gareth (Clwyd W)
Thomas, Gareth (Harrow W)
Thomas, Simon (Ceredigion)
Tipping, Paddy
Todd, Mark (S Derbyshire)
Touhig, Don (Islwyn)
Trickett, Jon
Truswell, Paul
Turner, Dr. Desmond (Brighton Kemptown)
Turner, Neil (Wigan)
Twigg, Derek (Halton)
Tynan, Bill (Hamilton S)
Vis, Dr. Rudi
Ward, Claire
Wareing, Robert N.
Watson, Tom (W Bromwich E)
Watts, David
Weir, Michael
White, Brian
Whitehead, Dr. Alan
Williams, rh Alan (Swansea W)
Winnick, David
Wishart, Pete
Wood, Mike (Batley)
Woodward, Shaun
Woolas, Phil
Worthington, Tony
Wright, Anthony D. (Gt Yarmouth)
Wright, David (Telford)
Wright, Tony (Cannock)
Wyatt, Derek
Tellers for the Ayes:
Mr. Ivor Caplin and
Mr. Jim Murphy
NOES
Ainsworth, Peter (E Surrey)
Amess, David
Atkinson, David (Bour'mth E)
Atkinson, Peter (Hexham)
Bacon, Richard
Baldry, Tony
Barker, Gregory
Baron, John (Billericay)
Bellingham, Henry
Bercow, John
Beresford, Sir Paul
Blunt, Crispin
Boswell, Tim
Bottomley, Peter (Worthing W)
Bottomley, rh Virginia (SW Surrey)
Brady, Graham
Brazier, Julian
Browning, Mrs Angela
Burns, Simon
Burt, Alistair
Butterfill, John
Cameron, David
Campbell, Gregory (E Lond'y)
Cash, William
Chapman, Sir Sydney (Chipping Barnet)
Chope, Christopher
Clappison, James
Clarke, rh Kenneth (Rushcliffe)
Clifton-Brown, Geoffrey
Collins, Tim
Conway, Derek
Cran, James (Beverley)
Curry, rh David
Davis, rh David (Haltemprice & Howden)
Djanogly, Jonathan
Dodds, Nigel
Duncan, Alan (Rutland)
Duncan, Peter (Galloway)
Duncan Smith, rh Iain
Fabricant, Michael
Field, Mark (Cities of London & Westminster)
Flight, Howard
Flook, Adrian
Forth, rh Eric
Garnier, Edward
Gibb, Nick (Bognor Regis)
Gillan, Mrs Cheryl
Gray, James (N Wilts)
Grayling, Chris
Green, Damian (Ashford)
Greenway, John
Grieve, Dominic
Gummer, rh John
Hague, rh William
Hammond, Philip
Hancock, Mike
Hawkins, Nick
Hayes, John (S Holland)
Heald, Oliver
Hendry, Charles
Hepburn, Stephen
Hoban, Mark (Fareham)
Hogg, rh Douglas
Horam, John (Orpington)
Howarth, Gerald (Aldershot)
Jack, rh Michael
Johnson, Boris (Henley)
Key, Robert (Salisbury)
Kirkbride, Miss Julie
Lait, Mrs Jacqui
Lansley, Andrew
Leigh, Edward
Letwin, rh Oliver
Lewis, Dr. Julian (New Forest E)
Liddell-Grainger, Ian
Lidington, David
Lilley, rh Peter
Loughton, Tim
McIntosh, Miss Anne
Mackay, rh Andrew
Maclean, rh David
McLoughlin, Patrick
Malins, Humfrey
May, Mrs Theresa
Mercer, Patrick
Mitchell, Andrew (Sutton Coldfield)
Moss, Malcolm
Murrison, Dr. Andrew
Norman, Archie
O'Brien, Stephen (Eddisbury)
Osborne, George (Tatton)
Ottaway, Richard
Paice, James
Paterson, Owen
Pickles, Eric
Prisk, Mark (Hertford)
Redwood, rh John
Robathan, Andrew
Robertson, Laurence (Tewk'b'ry)
Robinson, Peter (Belfast E)
Rosindell, Andrew
Sayeed, Jonathan
Selous, Andrew
Shephard, rh Mrs Gillian
Shepherd, Richard
Simmonds, Mark
Simpson, Keith (M-Norfolk)
Soames, Nicholas
Spelman, Mrs Caroline
Spicer, Sir Michael
Spink, Bob (Castle Point)
Spring, Richard
Steen, Anthony
Streeter, Gary
Swayne, Desmond
Swire, Hugo (E Devon)
Tapsell, Sir Peter
Taylor, John (Solihull)
Taylor, Sir Teddy
Tredinnick, David
Trend, Michael
Trimble, rh David
Turner, Andrew (Isle of Wight)
Tyrie, Andrew
Viggers, Peter
Waterson, Nigel
Watkinson, Angela
Whittingdale, John
Wiggin, Bill
Wilkinson, John
Willetts, David
Wilshire, David
Winterton, Ann (Congleton)
Yeo, Tim (S Suffolk)
Young, rh Sir George
Tellers for the Noes:
Mr. Robert Syms and
Mr. Mark Francois
Question accordingly agreed to.
Clause 138 ordered to stand part of the Bill.
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