17 Dec 2012 : Column 633

In the autumn statement, the cost of the policy was estimated to be rising to £1 billion. The IFS concluded:

“Much tax policy is made carefully and with extensive consultation. But it doesn’t take very many of these sorts of rushed, ill thought out and badly designed bits of policy to undermine the rest of the system.”

Let us move on to the Business Secretary. In “A Christmas Carol”, the Business Secretary is the Bob Cratchit to the Chancellor. He came out following the Government’s conference announcement to appease those in his own party who recognised how ridiculous the policy is. The Business Secretary wrote:

“This is categorically not a case of us allowing no-fault dismissal—a scheme championed by Tory donor Adrian Beecroft—by the back door and condemned by Liberal Democrats as introducing a ‘hire and fire’ system.”

The Business Secretary is absolutely right. This is not compensated no-fault dismissal by the back door; this is the ghost of Beecroft present. What we have here is a final attempt by the Chancellor not just to deliver his Beecroft-compensated, no-fault dismissal by the back door; instead, given the issues around the paper value of shares, particularly in non-quoted companies that might sack employees when business falters, it is a step even further than Beecroft. This is simply no-fault dismissal—without any compensation.

Worst of all is the second “Tory tax bombshell” of this Parliament, this time involving income tax and national insurance. The Liberal Democrats will remember the phrase, given that they coined it in 2010 in relation to VAT, which they subsequently put up. In Committee, the Minister read out the section from the autumn statement:

“The Government is also considering options to reduce income tax and National Insurance contributions…liabilities that arise when employee shareholders receive their shares, including an option to deem that employee shareholders have paid £2,000 for shares they receive. This option would mean that the first £2,000 of shares received under the new status would be free from income tax and NICs.”––[Official Report, Growth and Infrastructure Public Bill Committee, 6 December 2012; c. 490.]

This is, quite frankly, in the words of the Government “bonkers”. An employee who received as little as £4,000-worth of shares would be hit with PAYE and national insurance charge of hundreds of pounds in their first pay packet, despite having never realised the value of these shares—if, indeed, they ever have any value at all. Share plans expert Matthew Findley of Pinsent Masons has said:

“The Government’s decision to press ahead, despite widespread criticism, is not surprising given the amount of political capital originally invested in the idea…The level of opposition to the proposal is clear from the Government’s response to the consultation but little of what has been said so far is likely to improve the position. Critically, the income tax position of employee owner shares has yet to be finalised.”

This is simply not good enough.

In conclusion, we fully support employee ownership, but this policy has the potential to undermine all the good employee schemes that exist. There has been little or no proper consultation, as the Government rushed this through in eight weeks in order to produce a response and an impact assessment before we got here today.

Justin King, chief executive of Sainsbury’s, who until last week served on the Prime Minister’s business advisory group, cautioned that the policy is