Last week at the Conservative Party conference the Chancellor announced a new equity ownership scheme. His proposed scheme, targeted at small companies, is entirely voluntary and cannot be forced upon employees. It would offer employees shares (from £2,000 to £50,000) in their business in exchange for certain employment rights. The shares are Capital Gains Tax free – which if the company grows extremely fast is a valuable offer.
The scheme has had a mixed reaction. However a few important points need to be made about his proposal:
- 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. That proposal would have applied to all employee contracts – this will only apply to workers at firms who want it.
- Even for those who volunteer for the proposed contracts, some key protections like those against discrimination will remain as well as the wide range of reasons for unfair dismissal, like refusing Sunday work.
There are some fast-growing businesses who may be attracted to the idea of a voluntary scheme which rewards employee ownership and provides opportunities for sharing capital gains, but it is not something intended for most ordinary businesses around the country.
For decades, many entrepreneurs have set up employer ownership businesses along traditional routes with full employment rights and this is likely to continue for the majority of cases.
* Vince Cable was MP for Twickenham from 1997-2015 and Secretary of State for Business, Innovation and Skills from 2010-2015