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Baroness Park of Monmouth: My Lords, I recognise that the noble and learned Lord made it clear at Report stage that a consultation period is still taking place. However, it is strange that the Police Ombudsman, who, above many others, must be seen to be connected with criminal justice, has still been unable to reply. It is equally extremely difficult to believe that, when she does answer, she could answer other than by saying that she would be prepared to submit herself to the inspector's remit. I make a last plea to the Government to consider putting the Police Ombudsman on the list, on the assumption that, no person thinking properly about her duty to criminal justice could very well do otherwise than say that she will submit herself.
The Lord Privy Seal (Lord Williams of Mostyn): My Lords, I am very grateful for the courteous remarks introduced by the noble Lord, Lord Glentoran, and echoed by other noble Lords. I shall respond, because it has never been a requirement for any of us to be relevant when speaking to any amendment on the face of this Bill.
We are reaching the end of a difficult journey. The noble Baroness, Lady O'Cathain, who I am pleased to see in her place, expressed serious, reasoned concerns about the Grand Committee procedure. I am happy to pay tribute to all who participated. It was a model of its kind; the House authorities were excellent in providing us with proper accommodation after the first two days; and I believe that in the scrutiny of this Bill we have done our duty properly to the people of Northern Ireland.
I have reminded myself of the areas in which improvements have been made: the judiciary; the lay members of the commission to declare in writing their commitment to non-violence, exclusively peaceful and democratic means; that the pool of candidates is to be reflective of the community; that appointment can be made only on merit; the roll-out in an orderly way of the new Public Prosecution Service; the designation of the DPP under Sections 75 and 76 of the Act; that we
listened particularly carefully to the concerns expressed on community safety partnerships, about which we have tabled amendments; and, not least, that the noble Lord, Lord Glentoran, achieved his requirement that the Secretary of State should be obliged to publish reports. Without being unduly self-congratulatory, we have done good work.Perhaps I may say also that I am pleased to see the noble and redoubtable Baroness, Lady Park of Monmouth, back with us after her recent indisposition. Furthermore, I welcome in particular the generous and good-hearted words of the noble Lord, Lord Maginnis. He does not agree with me on all occasions; indeed, he has not agreed on any occasion, but throughout we have had a civilised discourse and debate.
I turn now to Amendment No. 1. I can confirm for the noble Lord, Lord Maginnis, that there is no question of any organisation being able to opt out or to have a veto. We are continuing with our consultations. They are lengthy, but we have approached the matter on the basis that it is better to have a willing rather than an unwilling co-operator. That is the key to what we are doing. Some organisations have proved to be reluctant. Some claim to have sent letters to my honourable friend Mr Browne. I had better not mention one which claims that its letter has been lost. I shall leave noble Lords to draw their own ignoble conclusions as regards whose letter might have been lost in the post.
Noble Lords are entitled to something more definite than I have said in the past. What I am undertaking is this: the Secretary of State does intend to use this power and there is no prospect that the present limited list will remain. I have said privately to the noble Lord, Lord Glentoran, and I repeat for the benefit of all noble Lords the following. In the first week back after the Recess I shall undertake to write an update letter to all noble Lords and to place a copy in the Library of the House. That will set a terminal point at which decisions will have to have been made.
On that basis, I hope that the noble Lord will feel content that he has achieved his substantial purpose.
Lord Glentoran: My Lords, I thank the noble and learned Lord for that explanation which very generously he gave me earlier today in his office. I beg leave to withdraw the amendment.
Amendment, by leave withdrawn.
Lord Smith of Clifton had given notice of his intention to move Amendment No. 2:
- Page 28, line 6, at end insert—
The noble Lord said: My Lords, perhaps I may take this opportunity to reiterate what has been said by other noble Lords. The deliberations on this Bill have been lengthy—indeed, on occasion they have been too lengthy—but ultimately the legislation has come through well. On Second Reading I said that I felt that we were creating an overly elaborate judicial infrastructure, and I am still not persuaded on that point. However, I wish the Bill well. I think that some parts of it are excellent, in particular the provisions dealing with the treatment of young offenders. They are truly pioneering and I hope that they will be extended throughout the United Kingdom once they are up and running in Northern Ireland.
Overall, we welcome the Bill. Its enactment will properly devolve judicial arrangements to Northern Ireland. I wish to add my thanks to the noble and learned Lord the Lord Privy Seal. His discussions with all noble Lords have been of the highest order.
I do not intend to move the amendment.
Lord Williams of Mostyn: My Lords, in these happy and felicitous circumstances, I beg to move that this Bill do now pass.
Moved, That the Bill do now pass.—(Lord Williams of Mostyn.)
On Question, Bill passed and returned to the Commons with amendments.
The Parliamentary Under-Secretary of State, Home Office (Lord Filkin): My Lords, I beg to move that this Bill do now pass. In so doing, I should like to express my thanks to all noble Lords, in particular those on the Opposition Benches, for their constructive approach and the proper testing that they have given the Bill in its passage through the House.
Together with other measures being taken forward in co-operation with the industry, the Bill will help to remove the incentive for mobile phone theft and to tackle street crime.
I should also like to express my thanks to the Bill team. I commend the Bill to the House.
Moved, That the Bill do now pass.—(Lord Filkin.)
Lord Cope of Berkeley: My Lords, we are glad to have assisted in the passage of the Bill.
On Question, Bill passed and sent to the Commons.
"(k) any other organisations which the Secretary of State may by order specify from time to time.
( ) No order may be made under paragraph (k) unless a draft has been laid before and approved by a resolution of each House of Parliament."
6.54 p.m.
6.55 p.m.
Baroness Thornton: My Lords, I beg to move that this Bill be now read a second time. From the outset I wish to declare my interest as someone who works as an adviser to the Co-operative Group and as a member of the Co-operative Party.
I am honoured to move the Second Reading of the Employee Share Schemes Bill and I should like to take the opportunity to pay tribute to my honourable friend Mark Lazarowicz, who piloted the legislation through its stages in the other place with such skill that he succeeded in persuading the Government to join with him in extending the scope of tax advantages in the Bill.
The Bill was originally introduced to remedy an anomaly in the current legislation with regard to the operation of tax advantages available to employee share schemes. Ironically, the very businesses that provide for a high degree of employee ownership and involvement and are totally or partially employee controlled are often unable to distribute shares to the employees on a tax-effective basis because of their employee-based structure. That anomaly acts as a deterrent to the wider extension of employee ownership. This Bill seeks to address that problem.
Perhaps I may describe briefly the purposes of the Bill. It will encourage wider employee ownership in the UK and will do so by extending the tax benefits for employee share schemes for companies that wish to encourage widespread employee ownership.
It will facilitate the transfer of shares to an employee trust by companies that want to make a significant move towards employee ownership and transfer a large part of the company into a trust at the outset. At present, this action may be discouraged because to do so would not offer corporation tax benefits otherwise available when such shares are transferred on a year-by-year basis. Thus, provided that at least 10 per cent of the company's ordinary share capital is held on behalf of the employees by trustees, the Bill provides for corporation tax relief to be granted "up front" in respect of such shares.
In addition, the Bill seeks to make it easier for employee trusts which hold shares to elect employees as trustees of that shareholding, and so give employees a direct voice in the ownership of the businesses in which they work.
Clause 1 states that the Bill will amend Schedule 8 of the Finance Act 2000, covering the introduction and operation of share incentive plans. Clause 1(2) adds a provision to the SIP legislation, which gives a clear pointer to companies setting up an SIP that elected employees may become trustees. Clause 1(3) seeks to support the position of companies and, in particular, business owners who want to make a significant move towards employee ownership. It grants corporation tax relief up front where a significant block of shares—10 per cent or more—is transferred to an employee trust. Clause 1(4) ensures that the availability of the corporation tax deduction should be linked to the
distribution of shares in order to maintain the link between productivity and employee benefits. This also ensures that a proportionate part of the deduction will be withdrawn in respect of any shares which may for whatever reason be awarded to a non-Schedule E taxpayer.Clause 2 proposes changes to the Finance Act 2000 which are consequential on the other changes resulting from the Bill. Clause 3 provides that shares held in an SIP by trustees with the benefit of up-front corporation tax relief will not be subject to income tax on dividends and other distributions or capital gains tax for so long as the trustees hold them, during a period of up to 10 years. This extends the period for relief otherwise available under the SIP legislation, which is usually limited to two years. This measure is designed to ensure that the enacted provisions of the Bill operate in the same way as the provisions for existing legislation governing SIPs.
Clause 4 gives the Bill its title: Employee Share Schemes Act 2002. Clause 5 states that the Bill will become law on 6th April 2003. The Bill represents a milestone in rewarding long-term commitment by employees. There is no better incentive and motivation for employees than for their work to be recognised and for them to share in their firm's success. Research has shown that businesses with widespread employee share ownership outperform their rivals. The combination of employee share ownership and employee participation yields the best results for everyone.
I read with great pleasure the commitment that my honourable friend the Paymaster General gave to the issue in her remarks on Report in the other place. She said,
- "The Government attach great importance to employee share ownership and participation. Increasing employee share ownership is at the heart of the Government's productivity agenda
The Share Incentive Plan introduced in the Finance Act 2000 has made it easier for not just some, but all employees to become stakeholders in a company. I wholeheartedly welcome the Government's commitment and support for the Bill. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Baroness Thornton.)
7 p.m.
Lord Shutt of Greetland: My Lords, I rise to welcome the Bill. As a former Liberal Democrat candidate it has been mother's milk: a say and a share in the place where you work. I do not declare an interest, but I have an interest in the other sense. I was an initial director of Job Ownership Limited, which has been involved with the Bill. It is a further step towards wider share ownership.
The gist of the Bill is that major tax relief is available. That should encourage proprietors and employees. During the time I was involved with Job Ownership, 20 years or so ago, I became interested in the theology of employee-owned organisations. There is quite a span. The major element is whether the
employee ownership is collective or individual. I am in favour of letting many flowers grow, but I wonder whether there will be an opportunity to review the arrangements and see that there is a level playing field in terms of the fiscal arrangements of the organisations trying to encourage greater employee ownership; particularly the tax incentives.In the other place there was discussion about the John Lewis Partnership and some of the possible concerns of that firm in relation to the Bill. There are occasions when we nudge matters, and this is a nudging Bill. There is further help and assistance for employee ownership in the Bill and I rise to encourage that. I hope that the further nudge eventually goes through. Perhaps there should be an opportunity in the not-too-distant future to consider further nudges.
7.3 p.m.
Lord Cope of Berkeley: My Lords, I am happy to support the Bill. The noble Baroness, Lady Thornton, has done us a service in picking it up from the honourable Member for Edinburgh North and Leith.
I am speaking in this House on the Bill because I have been involved in encouraging employee share schemes, both when I was Minister of State for Small Firms in the Government of my noble friend Lady Thatcher and also later when I was in the Treasury. I am a longstanding supporter of small businesses and of employee share schemes. I agree with the remark of the noble Lord, Lord Shutt of Greetland, about many flowers blooming. There are many different ways in which such schemes may be encouraged, which work well in different circumstances. It should not be a function of government to persuade organisations to use one form as opposed to another.
The noble Lord also referred to the important outstanding matter of the John Lewis Partnership and other firms arranged on the same lines. As we all know, John Lewis is an outstanding example of employee share ownership. It is far more longstanding than any of the schemes of either the present or previous Government—of which I was a member—on this matter. It would be astonishing and wrong if John Lewis was to be excluded from the benefits of the Bill because of the arrangement of its partnership.
So far we have had only expressions of sympathy from the Government on that point. With regard to John Lewis and similar companies it is an example of what passes for activity by the Government: every assistance short of actual help. I hope that the Minister will be able to reassure us either today or in later stages on that aspect.
The Bill is a finance Bill in all but name. It is about tax. It amends the Finance Act 2000 and does nothing else. It was handled in another place by my successor as Her Majesty's Paymaster General, Dawn Primarolo, who was also my parliamentary neighbour. It is excellent that we are being allowed to discuss the Bill completely, not only today but in its later stages, and to discuss amendments should noble Lords wish. I look forward to the later stages being conducted in a full and proper manner as befits a Bill, even if it is a finance Bill in all but name.
7.7 p.m.
Lord Davies of Oldham: My Lords, I congratulate my noble friend Lady Thornton on bringing the Bill before the House. I am not sure that I share the exulted enthusiasm displayed by the noble Lord on the Opposition Benches, who delighted in the fact that this is a quasi-finance Bill and therefore felt that we should take extra delight in the proceedings. I have rather more respect for finance Bills in the other place not to develop a certain shudder about Bills on which discussion often went on long into the night under the old regime. Let us rest assured that, as the noble Lord, Lord Cope, described, the Bill amends the Finance Act; but it began as a Private Member's Bill in the other place and is being read in that vein here.
As my noble friend said in her opening remarks, employee share ownership is at the heart of the Government's drive for improved productivity and enterprise. In July 2000 we introduced the Share Incentive Plan and enterprise management incentives. The noble Lord, Lord Shutt, is right that the body of which he has fond associations, Job Ownership Limited, played its part in the Bill's development. So too did the Co-operative Party; I congratulate both organisations on their contribution.
As has been indicated in all parts of the House, the Bill enjoyed support on all sides of the Commons. The Government's proposals on share incentive plans and enterprise management incentives were developed in consultation with industry and both are proving very popular. For example, more than 600 companies have applied for Inland Revenue approval of their share incentive plans. This demonstrates our very real commitment to employee share ownership. But we are not complacent. The need for development will be monitored. Both the share incentive plan and enterprise management incentives will be fully evaluated in 2005-06, although there will be some preliminary findings available before then.
The Government have also made a commitment to look at the corporation tax treatment of share schemes to make it simpler, particularly for small companies—a matter to which the noble Lord, Lord Cope, referred and which I know is dear to his heart. This should provide further encouragement to introduce employee share schemes. The Government welcome the aims of the Bill to encourage employee participation and employee ownership. Research shows that companies with widespread employee ownership and participation out-perform their rivals.
The Government accept the idea of providing in the Bill a framework for employee representation on the share incentive plan trust for those companies that wish to use it. Inland Revenue officials are working with my honourable friend Mark Lazarowicz and his team on a trust deed that would provide for this with a view to making it available alongside a model trust deed already offered by the Revenue.
The Government fully support the transfer of shares into employee ownership. The new early corporation tax deduction will complete the measures that the Government have already taken to facilitate the
transfer of shares from individuals such as family owners into the share incentive plan. Capital gains tax roll-over relief is already available for individuals on the gain made when they transfer shares to a trust that holds at least 10 per cent of the ordinary share capital of the company. Shares that were held in a qualifying employee share ownership trust on 21st March 2000 can be transferred to a share incentive plan without the immediate corporation tax deduction being lost.An additional tax advantage is given in the Bill by allowing share incentive plan trustees to be exempt from income tax on dividends and from any capital gains tax that might arise on disposal of the shares throughout the 10-year period they have to award the shares to employees.
The Government share the widespread enthusiasm for the measure which has been shown today. The noble Lord, Lord Cope, asked about the John Lewis Partnership. The noble Lord is right, discussions are still on-going in respect of that company, which, because of its structure, raises particular issues in regard to this legislation. Not all the issues have as yet been resolved. But that is not through a want of co-operation by the Government and work is progressing constructively on that front.
I am aware of how much hard work has been put into the Bill by its proponents. They have worked with the Government to settle on a series of provisions that enjoy joint support and I am grateful for that. I affirm the Government's support for the Bill. Once again I congratulate my noble friend on the perceptive way in which she introduced the Bill and the clear way in which she outlined its issues. I am sure that she will ensure that the Bill has a satisfactory passage.
7.14 p.m.
Baroness Thornton: My Lords, I should mark the fact that I have been allowed out to play without my noble friend Lord Graham. He would have spoken in support of the Bill today but he is on his way to Manchester on Co-operative business. I should also mark the fact that I have had a great deal of support from Job Ownership and the Co-operative Party in preparing myself to deal with the technicalities of the Bill. Tax issues are not my speciality in this House, as noble Lords will know, and I am very grateful for their support.
I shall have to discuss with them the issue of John Lewis. I am sure that noble Lords will be aware that the Minister said on 21st June that the Government are taking the issue very seriously indeed and are trying to resolve it. I hope that they will succeed.
As to the point raised by the noble Lord, Lord Shutt, about the legal and tax regime in general for Job Ownership—and, indeed, for Co-operative and other social ownerships—I believe that very soon we shall see some developments from the Government in that area in terms of strategic issues concerning the whole regime. I hope that Job Ownership will take the Government's general statement of intent in this area as an opportunity to push for the kind of reforms we would like to see on a broader front. The Bill is not designed to do that, as noble Lords will know.
With grateful thanks to the noble Lords, Lord Shutt and Lord Cope, and to my noble friend Lord Davies, I hope that the House will give the Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
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