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Mr. Love: I thank the hon. Gentleman for being so generous with his time. Surely one of the other reasons for maintaining the five-year time limit is to ensure that employee share ownership is not abused, as it was in the past, and converted to profit-related pay, which was discredited?
Mr. Davey: I agree. The Bill is an anti-abuse measure, but it is more than that. It is important to remember that, in case there is a future lobby for the Government to get rid of the five-year period. We must ensure that the objectives of the tax relief are achieved. I do not think that the interests can be fused or productivity benefits such as reduced staff turnover can be achieved in a shorter period than five years. We may want to consider the time scale, but we should do so with great care.
Mr. Lazarowicz: Does the hon. Gentleman agree that it is typical of many employee-owned companies that part-timers may stay for longer periods? That is traditional in many businesses that employ part-time workers.
Mr. Davey: I am grateful to the hon. Gentleman for making that point. He is right. It is important that we do not set up false divides within the work force. We must remember that part-time employees play a crucial part in the economy. They should not be seen as necessarily moving in and out of the work force. They are permanent features of the work force.
The second major provision clarifies the option of employee participation. As I said in my opening remarks, that is the key radical aspect of the Bill. The hon. Member for Edinburgh, North and Leith said that the Inland Revenue would provide guidance, and that in its view, the measure was not needed, as the current legislation was adequate. I suggest to the hon. Gentleman that he should stand fast in his belief that measures such as the Bill are needed.
I am sure that the Inland Revenue will provide guidance and that its analysis is right, but it is important to provide greater clarity, transparency and awareness of the option. We need legislation that clearly encourages employer participation. In Committee, we can listen to the opinion of the Inland Revenue and consider other ways of providing clarity and ensuring that the current legislation and the options available are better known.
If there are to be non-professional trustees, as the Bill suggests, it is important that companies give them proper training. The role of trustee carries significant responsibilities for the wealth of others. When companies go down that route, they should ensure that the trustees elected by their employees are suitably trained.
The hon. Member for Aylesbury rightly mentioned the nature of the election, which is not specified in the Bill. I understand why the hon. Member for Edinburgh, North and Leith has chosen not to do so, as we could get involved in a huge argument. It is often better if
Although I agree with the hon. Member for Edinburgh, North and Leith that the primary legislation should not be over-specific, I believe that in Committee we should explore the issues, as the hon. Member for Aylesbury suggested, because public money is involved. Also at issue is the reputation of the employee share ownership movement, and of the fairly radical measure proposed by the hon. Member for Edinburgh, North and Leith to get more active employee participation. It is such an important social and economic objective that we must get it right. We may need to be more specific than we would like, but that is no reason for objecting to Second Reading. It is a matter for full debate in Committee. As the hon. Member for Aylesbury observed, it is possible that it could be dealt with through secondary legislation.
The third detailed measure in the Bill removes financial obstacles facing companies and provides financial relief if they choose to go down the route of employee share ownership. I welcome that. I do not know whether it originates with the right hon. and learned Member for Rushcliffe (Mr. Clarke). I am not familiar with the exact provision that he introduced. If it was introduced by him, that is not necessarily a poor source. The right hon. and learned Gentleman was responsible for some good measures.
In the March 2001 Budget and in the 2001 pre-Budget report, the Government expressed interest in the matter. I shall be interested to hear from the Paymaster General when she sums up the debate tonight[Interruption.] I meant this afternoon, as the Paymaster General reminds me. I am having a problem with timing. I hope that when she responds to the debate, she will say whether the measure is in line with the Government's thinking as it has developed since the 2001 Budget.
I shall speak briefly about the John Lewis Partnership, primarily because, as I said earlier, it has two retail branches in my constituency. I have received letters from three constituents about the Bill. [Interruption.] The Paymaster General implores from a sedentary position that I do not read out the full letters. I will not, but I will read extracts. The support shown by constituents for the measure is one of the reasons that I will support it today.
Mrs. G. Coleman of New Malden wrote, asking me to support the Bill. She made it clear that she wants the Government to go further. It is interesting that this letter and one or two others that I received are from employees of the John Lewis Partnership, who are not yet sure whether the legislation will apply to the company. If such doubts exist, we may need to ensure in Committee that the measure will apply to such firms.
In conclusion, I shall examine one or two of the alleged problems with the Bill and with the Government's plans. I dealt earlier with the five-year period and the matter of liquidity. Some people have argued that we are trying to get employees involved in risky investments. There is not a huge exposure in that regard, although there is, of course, a degree of risk. If people borrow against the assets or put some of their savings into buying them, a degree of risk will be involved, but it is not of the order of that which is associated with many other investments, especially as the Government have limits on the tax advantages of particular degrees of shareholding. The risks are reduced and are of a different order.
Some people have complained about complexity and have suggested that we are using the tax system to promote particular types of behaviour. As somebody who believes that the tax system is massively over-complicated, I am concerned about making over-complicated tax legislation. The hon. Member for Aylesbury rightly referred to the compliance costs. We in this House are not good at introducing simple tax legislation that minimises such costs. When Whitehall writes its regulatory impact assessments, it is not very good at considering the compliance costs of tax, as it uses a questionable methodology in doing its sums. It always considers marginal change, but companies already have a set of accountants and tax advisers to consider that. Indeed, to the company, the change will be marginal, but we never stand back and consider the overall effects of the increasing complexity. Adding all the marginal changes together can demonstrate a huge increase in compliance costs.
That is a serious issue. My approach to measures that add yet further complexity is to ask whether the benefits that will be achieved are really worth the costs. In respect of many of the Government's proposals, I do not think that such increases are worth the cost. The Government have tinkered with the tax system and have not justified the extra complexity to the House by demonstrating that it is worth the benefits that they maintain are achieved. However, as my previous remarks show, I do believe that there are such benefits in the type of legislation that is before us. I am completely convinced that the long-term growth, productivity and performance of UK plc will be significantly enhanced over time if we make the proposed improvement. In this case, I think that the extra complexity is justified, although perhaps complexity in
I have not seen any of the commentary on the Bill, but I believe that we should mark up another issue as a potential concern. It relates to what the hon. Member for Aylesbury said about the overall costs of the measure, which I think will be relatively minimal in the early periods. The Paymaster General shakes her head. I hope that that does not mean that the Government are going to oppose the Bill, and that she will persuade us that we can, at least through negotiation, ensure that the costs are not preventive. Indeed, it is some of the Government's other measuresnot only in respect of the proposed scheme, but elsewherethat might mean that the costs become a problem later.