I would like to make a plea to MPs of all parties not to support the new employee-owner status and to table an amendment to remove it from the Growth and Infrastructure Bill. Buried in section 25 of the Growth and Infrastructure Bill (as amended in Public Bill Committee), it seeks to provide a new employment status involving company shares in exchange for worker rights. It is due at report stage and third reading in the House of Commons on Monday 17 December 2012. I especially encourage all Lib Dem MPs to vote against what amounts to Beecroft by the back door and to support an amendment to remove it.
Of the 209 organisations which responded to the Government’s Consultation on Osborne’s Employee Owner Status, few expressed an interest in take-up. The government’s response to the consultation states that 184 organisations and individuals responded to the specific question on whether they would take up the new employee status. Only 3 said they would be willing to take it up. Only one of those was a business the other two were individuals.
Patrick Wintour in The Guardian states that businesses have “almost universally” rejected Osborne’s plan. The Chartered Institute of Personnel and Development, EEF and The Federation of Small Businesses amongst others have questioned the need for this new status and expressed doubts it would be taken up at all.
Employee Share Ownership is widely acknowledged to provide incentives to employees to work hard for their company and be committed to their job. The problem with Osborne’s plan is that it requires employee owners to give up hard earned workers’ rights. As Simon Caulkin in The Guardians uggests, “the two halves of the proposal cancel each other out” and goes on to state that:
there is nothing in the OECD figures to show a correlation between low employment protection and high economic performance. Rather, the reverse: greater protection seems to go with better economic performance.
The EOA also stated that
We welcome this latest contribution to the debate on employee ownership, but whilst growing employee ownership should be part of the UK’s Industrial Policy, such growth does not require a dilution of the rights and working conditions of employees – indeed employee ownership often enhances them.
Although it is acknowledged there would be little take-up of this employment status, the fact remains that the opportunity is there to take advantage of a new tax loophole and of a Beecroft-like fire-at -will power, leaving employees in uncertainty.
The fact that Capital Gains Tax would not be payable on the shares creates a potential tax avoidance loophole. Whilst the government is intent on clamping down on tax avoidance schemes generally, this initiative could, according to the Office for Budget Responsibility, cost the country £1bn in lost revenue. The Telegraph stated:
Of the £1bn, it indicated that as much as £250m could be down to tax avoidance.
Could there also be further costs though? The Government’s response to the consultation notes that clear guidance would need to be given to employer and employees. What form would this take? How much would it cost to publish clear guidelines on employee owner status?
The evidence is stacking up against this proposal. Employee-owner status should be thrown out of Parliament as soon as possible.
* Tracy Connell is a member of the Liberal Democrats in Newcastle City, and a regional officer.