Opinion: Time to quash Osborne’s employee-owner status

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.

In November the Employee Ownershop Association and IFS Proshare suggested that this proposal could undermine support for genuine employee ownership and employee share plans.

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.

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  • Hear hear Tracy

  • This really is a fantastic piece. Really good stuff Tracy.

  • Tracy Connell 12th Dec '12 - 3:13pm

    Some MPs I believe are on the case behind closed doors, but we will see what’s what in the Commons on Monday.

    If it does somehow get through this stage then it still has to go to The Lords, where I am sure a number of our peers will make mince meat of it. I do hope our MPs act rationally on Monday and get this sorted before it has to go to the Lords. I’ll be extremely disappointed if they all just nod it through to the next stage.

  • Brilliant work on this one Tracy. Keep it up.

    I bothered to fill in the consultation questionnaire and the more I thought about it, the more this legislation is either unworkable or insane in terms of the loopholes it creates.

    This should be stamped all over by any right minded MP. It is pernicious nonsense and if our MPs don’t vote against it, I really despair of our party.

  • Thanks RC. I filled in the consultation too, even though they tried to skew it to make people answer positively. The government’s response to the consultation seems to be a true and honest account of the responses received, but gives the impression that despite all the negatives, all the potential problems and lack of take up they still intend to press on with limited changes. What is the point of a consultation where responses are so negative and where it is clear it is not a workable policy if they are going to ignore those responses and press on anyway?!

    It’s just not acceptable.

  • Granville Spencer 13th Dec '12 - 2:47pm

    This Bill sounds nice but it takes everything and gives nothing.

  • I simply want to add my support to Tracy and hope we can get a really strong message to our MPs that they should oppose the giving up of employee’s rights. I was extremely disappointed with our leadership’s response to the idea and the messages from our party that simply stressed the idea of employee ownership were so naive and mistaken I could hardly believe what I was reading. It may only affect a small number of people but it would be the start of the erosion of an absolutely vital principle of employer’s care for their employees.
    Cllr. Nigel Jones

  • Tracy Connell 14th Dec '12 - 11:51am

    Thanks Nigel. Much appreciated.

    I have emailed all our MPs about the bill being at report stage and third reading on Monday. I hope they are all in attendance and will unite to throw out this idiotic idea.

  • I guess none of our MPs read LDV going off the exhibition tonight then and none of them read emails or tweets (bar one that I got a response from)?! Only 2 or 3 of them there for the actual report stage and third reading. It pains me to say it, but the only people talking any sense today or doing anything remotely constructive against this was Labour.

    Perhaps I should seriously consider Defecting??

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