After months of disagreement the House of Lords and the House of Commons today agreed a last minute compromise on the deeply divisive and unpopular "shares for rights" scheme. The entire Growth & Infrastructure Bill would have fallen if agreement was not reached before the end of the parliamentary session today.
The Lords secured a number of concessions from Government which makes the ill conceived scheme even more unlikely to be used by any businesses. This includes 1) a seven day cooling off period during which time acceptance of an employee shareholder contract is not binding 2) the provision of full written particulars to prospective employee shareholders and crucially 3) a right to full independent legal advice paid for by the employer - irrespective of whether or not the employee takes up the new status.
This builds on the previously secured Lords concession that nobody in receipt of Job Seekers Allowance will lose their benefits if they refuse to accept an employee shareholder status job - something that the Government had previously been keen to introduce.
To stay up to date with developments on this issue please check back to this page or follow ifs ProShare on Twitter at: https://twitter.com/ifsProShare
Yesterday the House of Lords rejected the employee shareholder clause of the Growth & infrastructure Bill by a majority of 69 having previously rejected the proposals by a majority of 54.
Phil Hall, Special Adviser to ifs ProShare, said: "We are pleased that the Lords have again rejected this unwanted, unnecessary and unworkable policy and note that they did so by an even larger majority than before. We very much hope this makes the Government properly reflect on what is fast becoming a major embarrassment to them. These plans must now be dropped at the earliest available opportunity."
The Bill has now returned to the House of Commons for further consideration under the "Ping Pong" legislative process which takes place when there is disagreement between the two Houses of Parliament.
To stay up to date with developments on this issue please check back to this page or follow ifs ProShare on Twitter at: https://twitter.com/ifsProShare
Earlier this afternoon the House of Commons voted to restore the employee shareholder clause to the Growth & Infrastructure Bill by 277 votes to 239.
This means the issue will again have to be considered by the House of Lords who will do so next week.
Phil Hall, Special Adviser to ifs ProShare said "It is deeply regrettable that the Government have again refused to listen to the views of the majority of UK businesses, all of the representative bodies for the share ownership industry and the majority of Peers in the House of Lords."
To stay up to date with developments on this issue please check back to this page or follow ifs ProShare on Twitter at: https://twitter.com/ifsProShare
Last month the House of Lords voted overwhelmingly to remove the widely condemned "Employee Shareholder" clause of the Government's Growth & Infrastructure Bill.
The policy would have enabled employers to pay their employees with shares worth as little as £2,000 to sign away many of their legal rights from redundancy pay and unfair dismissal rights to the right to request training and flexible working.
Many Conservative and Liberal Democrat Peers voted against their own party to ensure the clause was removed from the legislation but despite this the Coalition Government will try and reintroduce the policy when the Bill is put before the House of Commons on 22 April.
In response ifs ProShare, the voice of the employee share ownership industry in the UK, has written to all Conservative and Liberal Democrat MPs urging them to vote against their official party line to make sure the policy does not become law.
Phil Hall, Special Adviser to ifs ProShare said, “This has been voted against once already not just by the Labour opposition but by a number of Conservative and Liberal Democrat Peers together with the vast majority of Crossbenchers in the Lords.
We very much hope that MPs will act with similar courage and conviction and back the views of the majority of UK businesses - and all of the representative bodies for the share ownership industry - by voting against this ill conceived and destructive policy.�
Business Minister Michael Fallon MP has confirmed the Government's intention to sell Royal Mail during the current financial year and that employees will benefit through the availability of an employee share scheme.
He said, "It is our intention to conduct a sale during the forthcoming financial year, 2013-14, and I confirm that at the time of that sale we intend to make a share scheme available to the 130,000 employees of Royal Mail who have worked so tirelessly to turn it into a successful and profitable business and should share in that success."
ifs ProShare, the voice of the employee share ownership industry in the UK, has welcomed the removal of the controversial "Employee Shareholder" clause of the Government's Growth & Infrastructure Bill.
The clause of this new Bill would have permitted employers to pay their employees with shares worth as little as £2,000 to sign away many of their legal rights.
Following intense lobbying by ifs ProShare, the House of Lords voted to remove the policy from the Bill by an overwhelming 232 votes to 178. The Coalition was defeated not simply by the Labour Party but by the majority of Crossbenchers, ten Conservative peers and three Liberal Democrats.
This clause relates to labour laws and employment contracts i.e. the offer of a financial incentive in exchange for the waiving of various employment rights from redundancy pay and unfair dismissal rights to the right to request training and flexible working.
The Government sought to justify the policy by suggesting the benefits that flow from traditional forms of employee share ownership will inevitably follow despite there being no evidence to justify the assertion. The two are not the same and there is certainly no need for employment rights to be sacrificed.
Phil Hall, Special Adviser to ifs ProShare said, "We have repeatedly made clear that the Government's proposals for this new form of employment contract will undermine both the employee ownership and employee share plan sectors because of the widespread negativity that surrounds their proposals and the fact this new type of employment contract will be widely confused with traditional forms of employee share ownership."
Hall added, "We are grateful to the majority of Peers who voted against this wholly unacceptable policy and very much hope that when the legislation returns to the House of Commons MPs will not seek to reintroduce this ill conceived idea."
The Office of Tax Simplification (OTS) has today published the final report of its review of unapproved employee share schemes, commissioned by the Government on 5 July 2011.
The Government asked the OTS to carry out a two-stage review of employee share schemes. The first stage of the review looked at the four tax-advantaged schemes. This was completed in March 2012 and the Government gave their response at Budget 2012. Following consultation, autumn statement 2012 announced a package of simplifications, most of which will take effect during 2013.
The OTS has now completed the second stage of its review, focused on unapproved schemes (those that do not benefit from tax advantages). The Government will make their initial response to this report in the Budget, on 20 March 2013. The full report can be read here.
In relation to the Growth & Infrastructure Bill which includes a proposal for a new "employee owner" status, Business, Innovation & Skills Minister, Michael Fallon MP, today told the House of Commons:
"We listened to concerns about the name of the new status and although we have not made it the subject of an amendment, we are considering carefully the points made to us by ifs ProShare and the Employee Ownership Association. They told us that the name employee owner might create some confusion. We accept that we may need to describe the status more clearly."
To read the Ministers comments in full please click here
Labour MP Jim Fitzpatrick recently wrote to the Treasury asking for the SAYE and SIP maximum saving limits to be increased as they have not risen since 1991 and 2000 respectively. Treasury Minister David Gauke rejected the needs of those who save and invest in an all-employee share plan by refusing to consider an increase.
For further information please click here.
Graham Brady MP, Chair of the Conservative Party 1922 Committee, today asked the Treasury a series of probing questions about the need to review savings limitis for Save As You Earn (SAYE) employee share plans. These questions, together with the Treasury Minister's response can be found here.
The Employee Ownership Association (EOA) and ifs ProShare (the voice of the employee share ownership industry in the UK) have today written to all MPs sitting on the Growth & Infrastructure Bill Committee to urge them to drop the new "employee owner" status that forms part of this Bill.
This Committee is currently considering legislation which includes a clause (clause 23) creating a new "employee owner" status which involves employees receiving shares between £2,000 and £50,000 which will be exempt from capital gains tax. Employee owners will have lesser employment rights than others e.g. different unfair dismissal rules, certain rights to request flexible working and training, and statutory redundancy pay will all be affected. Individuals will also need to give longer notice to return from maternity leave or adoption leave.
The correspondence can be read in full here
ifs ProShare have responded to the Department for Business, Innovation & Skills (BIS consultation on their proposed new "employee owner status" announced by the Chancellor last month.
Our submission calls on BIS and HM Treasury to remove any ambiguity - these proposals are about labour laws and employment contracts so the Government must be explicit when referring to this new contract that it in no way relates to employee share plans.
Our submission can be read in full here
Earlier today the Chancellor announced plans for a new kind of employment contract called an "owner-employee".
The proposals mean new employee-owners can exchange some of their UK employment rights for rights of ownership in the form of shares in the business they work for, any gains on which will be exempt from capital gains tax.
To read the full BIS/HMT press release please click here.
The Liberal Democrat Party today voted to adopt a raft of policy proposals to encourage greater levels of employee share ownership and general employee ownership in the UK.
Key Liberal Democrat Policy announcements at Conference 2012:
Click here for full details.
ifs ProShare, the voice of the employee share ownership industry in the UK, today welcomed the imminent publication of Loughborough University research examining the "human impact" of employee share ownership in the UK.
The research commenced in 2008 and has used date from thousands of employees across a range of sectors; including one-to-one interviews with staff participating in HMRC approved share plans.
Phil Hall, Special Adviser to the ifs, said: "This comprehensive piece of research sheds new light on the impact that HMRC approved employee share plans can have on employees. It should provide real food for thought for the Treasury, HMRC and policymakers from all political parties. It will certainly help to inform debate around these important issues".
A PDF copy of the report will be available on this page from 20th September 2012.
This afternoon MPs and Peers from all parties joined over 125 ifs ProShare members to celebrate the 20th anniversary of the organisation.
Paul Fisher, ifs Chairman and Deputy Governor of the Bank of England gave a well received speech to members, highlighting many of the "…hard fought successes ifs ProShare has enjoyed over the past two decades" which he said could not have been achieved without such "an active membership." He went on to focus on the future by stating:
"There are many other areas where ifs ProShare will continue to push for improvements. If there is one certainty upon which members can rely, it is the certainty that we will not rest on our laurels."
A politician from each of the three main parties also addressed those in attendance. These were Liberal Democrat Lord Newby - who has held an interest in employee share ownership since his time at the Inland Revenue in the late 1970’s.
Adrian Bailey, the Labour Chairman of the BIS Select Committee who has demonstrated his support for employee ownership in all its forms over a period of many years.
And Michael Fallon MP, the Deputy Chairman of the Conservative Party and a member of the Treasury Select Committee for more than a decade.
For more information please contact Phil Hall, Special Adviser to the ifs, using the contact details below.
Please click here to view the ifs ProShare 20th anniversary commemorative booklet
Earlier today Deputy Prime Minister Nick Clegg announced the establishment of an independent “Institute for Employee Ownership� with the Employee Ownership Association, Baxi Partnership, Prospects and Co-operatives UK as founding members.
This was in response to the publication of the Government commissioned Nuttall Review of Employee Ownership also published today.
ifs ProShare, the not for profit membership organisation that acts as the voice of the employee share plans industry, has welcomed today’s announcement. However, they have also taken the opportunity to clarify that employee owned companies as promoted by the Institute are very different to companies that offer employee share plans.
Phil Hall, Special Adviser to ifs ProShare, said:
“Employee ownership, mutualism and employee share ownership through employee share plans have some similar outcomes but have very, very different characteristics.
Employee owned companies like Arup and John Lewis are largely or wholly owned by employees where as employee share plans involve employees having a small stake in their employer through physical shares in an employee share plan.�
The new Institute is set to mirror the activities of ifs ProShare but in the employee owned sector rather than in relation to employee share plans.
Hall added, “We see many similarities between the new Institute for Employee Ownership and our own organisation. The Institute will be a membership body, advance education on employee ownership, promote research and provide guidance where necessary – including to Ministers.
These are all activities that ifs ProShare already offer in the employee share plans arena. We welcome the establishment of something very similar for the employee owned sector and will work with them to promote a better understanding of both the distinctions and similarities between the two concepts.�
The Government commissioned Nuttall Review acknowledged the problem of people confusing similar but different concepts, stating employee ownership “is undermined by misperceptions and confused terminology.�
During a Parliamentary debate on the Queens Speech today Conservative Peer Baroness Wheatcroft blazed a trail for updating and reforming HMRC approved share plans.
On share plans as a means of boosting productivity, Wheatcroft stated, "The shareholder spring has certainly shocked one or two people and been achieved by a few active investors, but there are not nearly enough of them. This is an area where a little bit of government help might make a difference. More could and should be done to encourage employee share ownership. Who better to take a long-term view of their company than those who work in it? Research, including some by Oxera, has shown that companies with significant employee shareholdings are more productive than those without."
On increasing the maximum savings limits for SIP and SAYE Wheatcroft added,
"Now, I am clear about the Government's need to keep tight limits on spending. Those who would encourage them to spend, spend, spend, believing that Keynes has the solution, forget that Keynes would not have started from here. He would have used the good times to husband the cash and pay down the debt. Sadly, the previous Government just kept borrowing, so this Administration are very limited in what they can do. However, they have taken the view that reducing corporate taxes will enhance long-term growth and have moved strongly to lower those rates. I suggest that employee share schemes should be expanded, the tax relief involved being an investment in growing a stable shareholder base.
Today, the monthly maximum for a save-as-you-earn scheme is £250, and the annual limit on a share incentive plan is just £1,500. These limits have not moved since 2000. Companies that operate the schemes are convinced that, if the limits were raised, more money would flow into the schemes and their employee shareholding would grow. This has to be a desirable outcome."
To read the full Hansard transcript relating to this debate please click here
Phil Hall, Special Adviser to ifs ProShare, attended the All Party Parliamentary Group (APPG) on Employee Ownership earlier today.
Hall was able to explain how employee share ownership through share plans differs from the concept of Employee Ownership (where a company is owned by the employees) and how ifs ProShare company members differ to the company members of the Employee Ownership Association.
Jesse Norman MP acknowledged that, "...not a single John Lewis employee owns a physical share in the company" whilst Hall stated that employees are much more likely to have a say in the running of the company in an employee owned company than at a company that just offered share plans.
Whilst acknowledging differences it was also clear that there is considerable overlap between the two concepts. ifs ProShare will continue to support the work of the Employee Ownership Association and will work with the EOA wherever possible. We will also continue to make clear the distinctions between the two models as we recognise this remains an area of confusion for some in parliament, the media and the general public.
Adrian Bailey, Chairman of the Business Innovation & Skills Select Committee has again championed ifs ProShare calls for the Government to increase the savings limits for HMRC approved share plans. Speaking during a Budget 2012 debate in parliament he said:
"I believe that measures should be taken to foster and develop employee share ownership in this country. There is a huge body of evidence demonstrating that it leads to greater employee and consumer satisfaction, and greater productivity. The tax allowable savings rate for members who wish to invest in their companies has not been increased for donkey's years. The Government have said that they will review it. Given the commitment made by both the Prime Minister and the Deputy Prime Minister, I would have wished for something a little more solid than that, and I hope that the review will deliver it."
To read the full text of the debate please click here
In today's Budget speech, Chancellor George Osborne said, "The Treasury will review for this autumn what more we can do to encourage employee ownership."
Click here for more information.
Plaid Cymru's Westminster Group Leader, the Rt. Hon. Elfyn Llywd MP, today asked the Chancellor a series of questions relating to savings limits for SAYE (ShareSave) and Share Incentive Plan (SIP) employee share plans. Click here to read the parliamentary questions and the response from David Gauke MP (Exchequer Secretary to the Treasury).
Following pressure from ifs ProShare, the Chair of the BIS Select Committee, a member of Treasury Select Committee and Chair of the 1922 Committee have joined forces to call on the Government to increase the SAYE and SIP savings limits. Please visit the relevant news item here for more information.
Phil Hall, Special Adviser to the ifs, today appeared before the Liberal Democrat Policy Working Group on Mutualism and Employee Share Ownership.
The Working Group consisting of parliamentarians, business professionals and academics is currently examining the issue of employee share ownership, employee owned companies and mutualism.
Speaking after the evidence session, Phil Hall said:
"It was useful to have the opportunity to build on the written evidence ifs ProShare submitted to the Liberal Democrats Policy Working Group last month.
Following on from Nick Clegg's speech earlier this month it also provided a good forum to highlight that employee share ownership as promoted by ifs ProShare is very, very different from the John Lewis model; that over 2 million UK employees already participate in an all-employee share plan and that there are several simple changes to existing share plan legislation that would increase the number of employers and employees benefitting from employee share plans."
For further information about the lobbying activities of ifs ProShare please contact Phil Hall, Special Adviser to the ifs at phall@ifslearning.ac.uk or on 0207 444 7137.
