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12.14 pm

Ms Munn: Like my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz), I entered Parliament just over one year ago, and although most hon. Members once they have been here a while might expect to have had some influence on legislation, those of us who were fortunate enough to have been elected in the 2001 election did not necessarily expect to be having such an impact so early on.

Unlike my hon. Friend, I hesitated before putting my name into the private Member's Bill ballot. I was a bit daunted by the prospect of what it might mean, but having found out a little more about it I too had a go. However, unlike him, I was not lucky enough—or perhaps I was lucky, depending on how he now views it—to be drawn in the top 20. In reality, that is where the luck runs out, because it is difficult for ideas from Back-Bench Members to reach the statute book. Having closely watched the progress of two such Bills—those of my hon. Friends the Members for Edinburgh, North and Leith and for Harrow, West (Mr. Thomas)—there seem to be several key elements in ensuring that one's Bill has a better than average chance of reaching Third Reading and the statute book.

Choice of subject is important. My hon. Friend has had a long-term interest in this issue, and as we have seen today and during previous debates, he is supported in that by many hon. Members on both sides of the House. His attention to detail has also been important, as has the

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support of organisations such as the Co-operative party and other worker co-operative interests. The Treasury's helpful assistance was also crucial.

I welcome the Bill, whose overall purpose is to encourage wider employee share ownership. We have heard a lot today about how it will do that. Hon. Members emphasised the importance of promoting the schemes to organisations in our constituencies and others with which we have contact.

The Bill has two key elements—first, the move to have employee representatives on share incentive plan trusts, and, secondly, as my hon. Friend the Member for Glasgow, Maryhill (Ann McKechin) said, allowing early corporation tax deduction on money provided by a company to a share incentive plan trust to buy a block of shares to transfer into employee ownership within 10 years. The first of those elements is crucial as regards how employee share ownership can help businesses to be more successful. In itself, the measure would not necessarily encourage wider employee share ownership. However, if employers look at what has happened in companies that have adopted such schemes—we have heard some excellent examples, not only from this country, but from the United States—they may be persuaded that giving their employees proper representation and an active voice can be beneficial to the business in many ways.

The second key element relates to allowing companies the financial incentives that they should rightly have, because the benefits of employee share ownership accrue not only to individuals and to the company, but to society at large, and it is right to have tax laws that support the development of such trusts.

Share incentive plans were introduced in 2000 after extensive consultation by officials working with an advisory group representing the whole range of interests that needed to be included. It included representatives of large and small businesses, the Trades Union Congress, share scheme experts and academics who are involved in designing the schemes. Perhaps that explains why some matters are difficult for some of us to understand. As we said earlier, the new clause initially appeared difficult; perhaps the involvement of academics explains that, or perhaps it is due to my being relatively new to this place.

The Bill means that take-up of share incentive plans will be more viable and attractive. We know that the measure has been well received, although perhaps take-up has not been as quick as we would like. However, I believe that the Bill will help matters to progress.

Hon. Members of all parties accept that the Bill is a good measure. We need to ensure that all types of businesses—co-operatives, mutuals or private organisations—have good corporate governance. To achieve that, it is important that shareholders take a long-term interest and do not look for short-term gains or benefits, perhaps from investments. Employee shareholder trusts can contribute significantly to the long-term vision that I advocate.

Many case studies show that most successful results arise from employee share ownership schemes whereby employee share owners are genuinely involved and participate in the non-financial elements as well as the financial aspects of share ownership. They thus feel a greater sense of ownership.

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The Bill makes it easier for employee trusts that hold shares to elect employees as trustees of the shareholding. That crucial mechanism gives employees a direct voice in the business. They therefore do not benefit from simply having shares: they also have a voice.

It is appropriate for larger organisations to have employee share ownership, but it is easier for individuals in such organisations to believe that their voices cannot be heard. Giving trustees a voice changes their stake from an individual shareholding to a collective voice that can begin to achieve the results that everyone wants from employee share ownership schemes. The Bill ensures that employees' interests are represented, but it also convinces them that their individual shareholdings can give them a stake in the enterprise.

It is not only the company that benefits, as the hon. Member for Arundel and South Downs (Mr. Flight) said at the outset. The schemes help the company and improve the bottom line, but above all, they can enrich the experience of people's working lives. Different ownership structures may have different incentive structures and operational methods to achieve different levels of efficiency, but employee participation is important in generating company loyalty. As my hon. Friend the Member for Glasgow, Maryhill said, at a time of skills shortage and problems with recruitment and retention, encouraging employer loyalty and a long-term commitment to an organisation should benefit it.

The Bill will help in ensuring and enhancing employees' competence. Employee share ownership affects their motivation and commitment. Having such a commitment to the organisation can lead people to get involved in designing work that encourages the fullest contribution from employees so that the processes and procedures benefit the company.

Employee share ownership is, in itself, important, but these measures build on the inherent advantages by providing a mechanism for employees to have a collective voice and for their stake to be recognised through the appointment of employee trustees. I particularly regret the fact that my hon. Friend the Member for Edinburgh, North and Leith is not in his place at the moment, because I want to add my warm congratulations to him on steering the Bill through to this stage. That is an incredible achievement for a Member in his first year in Parliament, and I think that he will look back on this with some pride in the years to come. [Interruption.] Here he comes now.

This is particularly important for me because, like my hon. Friend the Member for Edinburgh, North and Leith, I am a Labour and Co-operative Member. He and I are the two most recently elected such Members, and we brought the membership of the Labour and Co-operative group in Parliament up to 29 members—its largest number yet. Perhaps we should put in for some of the considerations for minority parties that we heard about the other night in the debate on the reform of the House of Lords. I shall not pursue that issue today, however. I am heartened by the support that we have heard today on both sides of the House, and I congratulate my hon. Friend on getting the Bill to this stage.

12.26 pm

Linda Gilroy: It is a great pleasure to follow my hon. Friend the Member for Sheffield, Heeley (Ms Munn) again, having also followed her in the debate on new

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clause 1. It is also a great pleasure to congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) who has steered his Bill to this stage with skill, thoughtfulness and the full understanding that his background as a Co-operative Member of Parliament gives him.

The Bill widens and deepens the provision for employee share owners. There has been cross-party support for measures of this kind for many years under Governments of all colours, and the Bill builds on that tradition, exploring and improving in Committee and on the Floor of the House today this important measure. It is good to have heard the commitment of hon. Members, including myself, to getting our heads round the technicalities that give life to some of the principles that we all understand.

The Bill widens existing provisions by making more companies eligible for tax reliefs in relation to any move that they may be considering to distribute shares to employees by means of an employee trust. It thereby makes that distribution more likely to happen, and stands a strong chance of extending employee share ownership to many more people over time.

Clause 1(2) of the Bill as amended in Standing Committee B gives encouragement to companies to involve employees on those trusts when drawing up a trust instrument. Like my hon. Friend the Member for Edinburgh, North and Leith, I believe that it is important to bring about that clarification, as it will be an important part of ensuring that more companies take on board the measures that the Bill makes possible.

The Bill helps to ensure that, as years go by, employee share ownership becomes a more common experience for the many, not the few, which will make an important contribution to ensuring that wealth, power and opportunity are in the hands of the many and not the few. Some significant figures have been quoted during the debate to illustrate what employee share ownership means for the prosperity of companies, as measured through growth in share values. The hon. Member for Arundel and South Downs (Mr. Flight) referred to the importance of this in the current climate, with regard to share value, which is not currently as benign as it has been in recent years. That is one reason why the Chancellor and his colleagues have been keen to increase the number of employees with access to such schemes in all their various forms.

The measure builds on the provisions of the 2000 and 2001 Budgets in a way that should increase the number of employees with access to such schemes. It contributes to the quality and added value that arise from employee share ownership schemes. It introduces greater choice in the forms of ownership available, and it certainly builds on co-operative traditions and principles. We have seen a growth in, for instance, the industrial common ownership movement and in industrial common finance models.

The creation of the social enterprise unit in the Department of Trade and Industry is a significant landmark in recognising the important contribution that mutually owned organisations have made, as we marked recently when the Industrial and Provident Societies Bill passed through the House.

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There are a number of perspectives that one can bring to this measure. It has all-party support, but is underpinned by co-operative principles that sit comfortably with those of the Labour party. I shall quote a little more from those principles:

Employee share ownership schemes are good for employees, for their companies and for the economy. Let me take each of those in turn. They are good for employees because the important financial stake that the Bill underpins rewards employees if their company does well. After all, there is nothing more galling than when others benefit disproportionately from one's efforts as a worker in a company, and this measure is one way in which such an imbalance can be addressed.

Clause 1(2) is important in encouraging companies to involve employees when drawing up trust instruments. Equally, when the going gets tough, it gives employees a sense of having an integral stake in the company's well-being—perhaps even a sense of being an important part of any survival strategy that needs to be developed.

Employee share ownership schemes are good for companies, because the financial involvement leads to increased employee commitment. They allow employees to become more involved in the running of their company, which, as the hon. Member for Tunbridge Wells (Mr. Norman) said, is absolutely crucial.

If employees are more aware of any difficulties that arise within the company, it makes them more aware of the management processes and more likely to be able to help in heading off the problems and tackling them constructively. If employees are more aware of opportunities that arise within the company, those opportunities can be taken early and not missed altogether. Through that involvement, employees are more likely to act on their awareness. That results in a virtuous circle of commitment, which companies need if they are not only to survive but to thrive in an increasingly competitive world.

Drawing on that experience is especially important and beneficial to companies that rely for progress on research and development, or need to get their choices right first time. I refer to the Scott Bader company, which has given sterling support to my hon. Friend the Member for Edinburgh, North and Leith in developing the Bill. I think that I am right in saying that the company is at the cutting edge in the development of polymers and composites—exactly the sort of research and development that I am talking about.

The need to get choices right first time is especially important for the service industries. We have heard it suggested in a number of interesting contributions that there may be a need to extend the provisions to the public sector, especially because of the importance of public services, in which employees' sense of ownership of what they doing can be critical.

My hon. Friend the Member for West Bromwich, East (Mr. Watson) suggested that more traditional firms could also be encouraged to consider such issues. He mentioned the engineering firms in his constituency; my constituency also contains such firms. It was suggested to my hon.

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Friend the Member for Edinburgh, North and Leith that he should look ahead, beyond the hoped-for successful passage of the Bill, to see what can be done to encourage take-up of employee share ownership proposals.

That is very important, and one good way of proceeding is to look at what works. Perhaps we should look within the co-operative movement, maybe with the support of the companies that have been so energetic in backing the Bill, to see whether we can find an annual way of celebrating what is being done in respect of employee share ownership proposals. Perhaps that could be done across the different sectors, so as to include engineering, services and research and development. My hon. Friend the Paymaster General might tell us that that is already happening, but unless it is, those of us who have developed an interest in employee ownership might look at what we could achieve through such an annual celebration of take-up by companies not only of the proposals in the Bill, but of the other various forms of employee share ownership that have been mentioned.

The provisions will be good not only for employees and their companies, but for the country. The more we can encourage their take-up, the better, in terms of developing a long-term approach to the companies' welfare, not only contributing to the economy at a survival level, but helping it to thrive. The Bill is also important for competitiveness, for the sort of reasons that I outlined, as employees will take a keener interest at an earlier stage in making progress on the threats or opportunities of which they are aware.

Employee ownership also encourages growth, plus the wider benefits of social cohesion and regeneration. Research in Italy and the USA has demonstrated that the benefits include not only economic ones of the sort that have been mentioned, but improvements in respect of education and health, reduced crime, greater social participation and better capacity to weather periods of unemployment in local economies.

As I mentioned on Second Reading, John Monks, in a foreword to the Mutuo publication "Employees Direct", said:

Not many of the hon. Members who are present are not convinced of the arguments, but I recommend that document to them, as it contains a range of powerful arguments to show how important to the general economy of the country the principles that we are debating are.

The Bill, as refined and amended in Committee, will open up more opportunities for employee share ownership and add to the eligibility of a small but important sector of employees to participate in such schemes. It will help to obtain added value for people's interest and commitment to their work. Employees, their companies and the country will benefit. I am grateful to my hon. Friend the Member for Edinburgh, North and Leith for involving me in the Bill through my membership of the Standing Committee. I wish it well in the other place, where it will go today, and look forward to its return to this House.

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