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Mr. Richard Bacon (South Norfolk): I shall be brief. I want to make two or three points, if I can remove the frog from my throat. It has become fashionable in my party to have a frog in the throat, and I am trying to adopt the style of the Front Bench. I shall also try to make myself understood.
Many constituents have written to me about employee share ownership, including eight partners in the John Lewis Partnership. I am delighted to support the Bill. The John Lewis Partnership has several excellent stores in my area, including Bonds, a department store in Norwich, and two branches of Waitrose, one of which is in my constituency. They provide a superb service to local people in Norfolk as well as employment for several hundred people.
I confess to having a lot of sympathy with the criticisms made of the actions of my party in the 1980s in introducing schemes that benefited only some, rather than all, employees. Manifestly, something that is introduced because it is of benefit to certain classes of employee ought, by its very nature, to be available to all employees. The former head of the Prime Minister's policy unit looks as though he wishes to intervene. I give way to him.
Mr. David Miliband (South Shields): Does the hon. Gentleman share my pleasure in an example of a change of attitude in South Shields? It exemplifies the shift that he has talked about, from rewarding only those at the top of the company to rewarding everyone throughout. For 11 weeks last autumn, a major employer in my constituency was in receivership. During that time, a management buy-out team was brought together and I am delighted to say that in December a new company, Circatex, was launched. The first thing that the new management did was to introduce a 30 per cent. employee share ownership scheme for the new company, as a way of showing their commitment to the employees and saying that they were there for the long term. They wanted to reward the employees, many of whom had been with the company for 10 or 20 years, and make them part of the company's future. Does the hon. Gentleman hope, as I do, that that represents a change of attitude for significant parts of British management, as well as for those in the House?
Mr. Bacon: I agree with the hon. Gentleman that that is representative of the change in attitude. In fact, there has been a sea change in attitudes generally. I enjoyed what I might almost call the Thatcherite speech by the hon. Member for West Bromwich, West (Mr. Bailey). I used to go to West Bromwich as a small boy to watch its football team; it did not seem to be a bastion of Thatcherism in the late 70s. In fact, I joined the Conservative party because of Red Robbo, whom I am sure the hon. Gentleman remembers well.
There has been a change in attitudes, and that is most welcome. It is extraordinary that anyone should suppose that these incentives would not be sought by all kinds of employees, and I am very pleased to support the principle of the Bill. We have nothing to fear from diverse forms of capital ownership. That could mean ordinary shareholding in the traditional western capitalist sense. I am delighted to see my hon. Friend the Member for Cities of London and Westminster (Mr. Field) here in full battle dress.
Mr. Mark Field (Cities of London and Westminster): I think the full battle dress will appear after lunch. My hon. Friend will be glad to know that my luncheon activities are being catered for. May I also say that I very much agree with the Bill? It seems that the John Lewis
Mr. Bacon: I have noticed that, any time after about 4 o'clock, the likelihood is that I shall find my hon. Friend in a dinner jacket, limbering up for his evening activities, usually with the King of Jordan or somebody like that. The rest of us have to slum it in the Terrace caff.
We have nothing to fear from diverse forms of capital ownership. That could mean ordinary share owning, co-operatives, employee trusts or mutuals. I acted for a mutual building society for some months; I was seconded to it three days a week. Hon. Members may remember when the Britannia building society faced a most unwelcome challenge from a demutualisation campaign. If anyone doubts the benefits of what is sometimes described as the nebulous trade known as public relations, I would refer them to the photographs that occasionally appeared in the tabloid newspapers of that mad butler, Mr. Michael Hardern, wearing a dress, under the rather suggestive headline:
Reference was made earlier to the business of profit-related pay, and to its being discredited. I have not examined the issue in detail, but it would not surprise me if it had not worked as well as it was supposed to because, in a funny sort of way, this question is not mainly about money. Money is obviously important, but this is mainly about people having control over their own lives. The hon. Member for South Shields (Mr. Miliband) referred to the company in his constituency. In a previous incarnation, I used to write about management buy-outs and management consultants helping companies that were on the brink to climb out of that position. Nearly always, the solution involved drawing in the entire work force and making them work with one purpose towards success.
Mr. Love: Does the hon. Gentleman agree that we will really have seen the revolution that people have been talking about today when companies that are not on the brink of bankruptcy or in financial difficulties involve their employees, without the spur that bankruptcy provides?
Mr. Bacon: I could not agree more with the hon. Gentleman. I find it difficult to understand why managers would ever think of introducing an executive share option scheme that would be available only to them and those close to them, and not to everyone else. The Government should seriously consider ways of making it more beneficial for companies to have schemes that involve everyone, rather than involving only some employees. I would be strongly in favour of that. The principle of employee share ownership deserves the widest support on both sides of the House, and the Bill definitely deserves a Second Reading.
Dr. Doug Naysmith (Bristol, North-West): I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on his success in the private Members' ballot, and on choosing such a worthwhile and achievable topic for his Bill, which he introduced so clearly today.
We have already heard a lot about partnershipnot just the John Lewis Partnershipsometimes from unusual sources, which is to be welcomed. I want to expand on the principle of partnership between the work force in general, through employee trusts and shareholder trusts, and board members of the company. Partnership clearly pays. Companies that tap into the skills, knowledge, commitment and enthusiasm of their work force are the better for it. We have heard examples of that already. Innovation and productivity are positively related to a partnership approach, in which the work force can influence strategic decisions and individuals have more control over the immediate decisions in the company that affect them.
That is increasingly true as our economy becomes ever more knowledge-based and skills-driven. Companies that fail fully to harness their work force's potential will lose out in the future. Those that forge successful workplace partnerships will gain an important competitive advantage. For a partnership to deliver, however, it must be genuine; anything less will lead to disillusionment and resentment. Structures are required to ensure that such partnerships are demonstrably real and equal. Although we have heard discussions today about what that should mean, and whether the detail should be spelled out now, that area can be fruitfully explored when the Bill gets into Committee, as I believe it will.
Collective ownership stakes for employees could play an important role in the achievement of that. Collective shareholder trusts could signify a shared interest in the long-term success of organisations, while providing a collective voice at boardroom level for members of such truststhe employees who generate companies' wealth. The shareholder voice of employees could provide a powerful counterweight to the short-term horizons of other investors, and create the conditions that are necessary for stable workplace partnerships to flourish.
It is widely acknowledged that business in Britain faces two major challenges. The first is this. Successive commissions and reports have sought to improve the structure of corporate governancethe way in which boards of directors operate and conduct their business, the way in which they respond to wider concerns including the environmental impact of their companies' operations, their responsibilities to the communities in which their companies operate, and so forth. The combined code on corporate governance that resulted from those deliberations is useful, although many of us would like the standards to be given a statutory basis.
One of the main problems identified by the inquiries is the inadequate involvement of the chief shareholders, the financial institutions. It is important for shareholders to take a long-term interest in their investments. Employee shareholder trusts could achieve precisely that, and could encourage institutional shareholders to do the same. Creating employee shareholder trusts, and encouraging employee shareholders to play an active role in their companies, could go a long way towards improving the corporate governance of United Kingdom firms.
This is the second challenge. The Government have stressed the importance of boosting productivity in UK firms. They have rightly recognised that the key to that will be the commitment and participation of the work force, and they have accepted the view that, developed in the context of partnership, employee share ownership can produce significant productivity gains. The task now is to push at the margins of Government policy and to encourage workers, through their representatives, to use the power of their equity stakes to influence corporate decisions.
I welcome the proposals, although encouraging employee shareholders to play an active role will not be an easy task. Advice and training will be needed for those who will take positions of responsibility in trust organisations. I understand that the Trades Union Congress has established a working party to deal with the details: it will include representatives of the TUC and the Confederation of British Industry, as well as the chief executive of the Co-operative Union, leading academics and others. The results, along with the outcome of the Government's company law reform review, could lay the foundations for a transformation of corporate governance. Such an achievement would be a landmark for Labour's second term.