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Mr. Watson: The Bill gives a practical expression of partnership values. It will promote a new culture of work and innovation in the workplace. It represents a renaissance for the co-operative and mutual movement.
I support the Bill not just because it embodies the values of my partyvalues that gave me a reason to stand for Parliamentbut because I admire the tenacity and determination that enabled my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) to steer a technical and complex Bill through nearly all its stages during his first year as a Member of Parliament. That gives hope to new Members and Back Benchers: it shows that we really can make a difference to the lives of those who elected us. I only hope that when, having dealt with seven items in two and a half hours, we reach the Organ Donation (Presumed Consent and Safeguards) Bill, my hon. Friend will be present to support it and me.
Members on both sides of the House have agreed that we should find a way of encouraging wider share ownership. I am pleased to note that there is also a consensus between us and our industrial partners the Confederation of British Industry and the Trades Union Congress. The Bill presents challenges to both organisations. It challenges trade unions to change the way in which they relate to their members and to employers. I am glad that it has had so much support not just from the TUC as a whole, but from leading unions.
The general secretary of my union, Sir Ken Jackson, has been at the forefront of changing TUC policy, introducing more innovative ways of working and providing an impetus for the TUC to change its view of employee share ownership. He has pressed for such developments for many years. Today is a big day for him: the ballot papers for the election are being posted. I am sure that union members will take account of a debate in the House of Commons in which his contribution has been recognised when deciding how to mark the papers that land in their letterboxes on Monday morning.
As I have said, the Bill is concerned with promoting a culture change, and with innovation. Those are key elements in the future of our economy. Productivity lies at the heart of the economic challenges with which we will be presented over the next five years. I was pleased to learn that more than half the current employee share ownership schemes are in small and medium-sized enterprises, because those are the companies that need to grow. Unless they embrace the productivity challenge they will face over those five years, such growth will not be possible. As hon. Members on both sides of the House have said, more employee participation in company decisions can really help productivity, and the Bill will provide that.
The Bill also challenges employers, however. My constituency contains excellent employers, but some use dated management practices. The Bill would allow them to embrace change so that their employees can have not just a greater economic say in their companies, but a louder voice in the boardroomand in the sectors to which a number of companies in my constituency belong, engineering and manufacturing, the say of skilled people, many of whom still work with their hands, is very important. A slight refinement of a production method, a slight change in the distribution chain or a slight speeding up of the process can make a real difference to the bottom line on a balance sheet. In such areas, where returns are so small these days, the Bill might be the difference between success and failure.
My hon. Friend the Member for Dundee, East (Mr. Luke) described how player power might play a role in the direction of football clubs, just as supporter power has breathed new life and direction into lower-league clubs. As a result of the debate on the Industrial and Provident Societies Bill, my own club, Kidderminster Harriers, set up a Supporters Direct group, although I wish that this Bill had been in place six months ago. Had the players, manager and employees been able to take a stake, the then manager, former Liverpool player Jan Molby, might have dipped his hand in his pocket to make a financial injection to the club before deserting it to move to Hull. The Bill is a socially good innovation. Indeed, had it been in place previously, Wimbledon football club might still be in Wimbledon.
The law of unintended consequences might kick in when the Bill is introduced, as it will create new ways of working and new institutions. It will also contribute to job satisfaction in the workplace and improve company organisation. I shall take these measures to the black country chamber of commerce, which is always looking for support for its businesses from the Treasury and from this place, and they will be welcomed by small and medium-sized companies throughout the land.
Mr. Love: Like other hon. Members, I congratulate my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz) on so successfully piloting the Bill to this stage in his first year as a Member of the House. I also congratulate all those who have supported the Bill, such as the Co-operative party and Job Ownershiptwo diverse organisations that have given such effective back-up to that endeavour. Their success is the Bill that we have before us today.
I welcome the Treasury concession, which came in the amendment that we debated earlier. I shall take my hon. Friend aside afterwards to ask him how he achieved it, as it is a great success for a new Member to persuade the Treasury of the case for such a change. I also welcome the cross-party support for the Bill, which is crucial. The hon. Member for Twickenham (Dr. Cable) spoke for the Liberal Democrats and the hon. Member for Arundel and South Downs (Mr. Flight) for the official Opposition. It was pleasing to see someone of the experience of the hon. Member for Tunbridge Wells (Mr. Norman) taking the
However, some things are missing from the Bill. A number of hon. Members referred to employee trusts, John Lewis and Peter Jones. That point still needs to be taken up. On Second Reading, I raised the issue of mutuals. I was approached by Nationwide, and I recognise the difficulty for such organisations. We need to establish a critical link between share ownership and corporate performance, because that is what lies at the heart of widening share ownership. We should extend the benefits of share ownership to people who work in successful sectors of the economy; otherwise they will not be able to work on a level playing field with competitors that can develop those benefits.
The Bill encourages wider share ownership and employee participation and representation in the share incentive plan. It does so by extending tax benefits to companies that want to make a significant move towards employee share ownership, and it is important to stress that. It extends the benefit of an upfront corporation tax relief. The Bill ensures that, in return for that tax relief, the shares must be distributed to individual employees within a certain time scale, in order to maintain the critical link between productivity and employee benefits.
The Bill also provides a safeguard, in that the shareholding being transferred must be significant. It sets that at a minimum of 10 per cent. of the ordinary share capital, which must be held by the trustees in one year. I accept what the hon. Member for Tunbridge Wells said about that excluding larger companies, but it is important that we set a benchmark. That distribution must take place within certain limits. Thirty per cent. of the shares must be transferred to employees within five years, and 100 per cent. within 10 years; otherwise the tax relief is taken back.
Almost as important, the Bill encourages representation and participation by allowingit does not enforce thiselected employees to become trustees of the share incentive plan. We have not discussed how they should be elected, and I shall not begin that debate, but it is interesting that that issue was never raised. I believe that the person who sits on the trustee board should be a representative of the employees, who will help to foster trust and confidence in the company.
All the studies show that the non-financial aspects of share ownership are just as important as the financial ones in ensuring better results, improved performance and that we get the successful companies that this country needs.
Like other hon. Members, I do not want to overstate the effect of the Bill, which is a modest measure. However, it reinforces some of the effects of wider share ownership, and I should like to refer to one or two of them that it will help to promote.
The Bill will further employee participation. I mentioned trust earlier. As a result of the greater commitment that trust will engender, employees are much more likely to hold on to their shares. One of the great failures of the privatisations of the 1980s and 1990s was that employees got rid of their shares at the earliest opportunity, so they did not benefit from the major pluses of wider share ownership. It was no good for them as employees, and it did not assist the companies that were privatised.
The Bill will engage employees in the performance of their company. That is critical because employees bring specific skills. They bring specialist knowledge of the shop-floor. They have a different, perhaps unique perspective to offer. All those things will bring benefits to the company.
Employee engagement improves employees' motivation. They can support the aims of the company. They can foster innovation at local level. I was interested that the hon. Member for Tunbridge Wells mentioned in particular the role that shop-floor workers have played in the development of his company. There is a lot of evidence of all those things providing effective input towards greater productivity.
Participation reduces confrontation. We talk all the time in the House about confrontation on the shop-floor. Wider share ownership will develop a more co-operative ethos. We will have more partnership working between management and employee. All that will go to creating a more stable, better environment for the company to succeed.
Increased share ownership aligns the interests of the two different groups: the owners, represented by the management, and the employees. They start to work towards the same goal: the success of the company. As someone mentioned earlier, it tends to reduce short-termism, which is a great problem in the British economy.
Employees have a longer-term perspective of what is happening in their company. They take not the two or three-year time scale that shareholders and the City take but a much longer time scale. They are likely to spend their life with the company and want effective investment decisions in terms of research and development and of capital employed in their industry. That can be brought home in the boardroom.
In the boardroom, we will get better corporate governance because there will be a wider group. It will not be the narrow group of shareholders alone who decide things. There will be a wider interest that takes into account the role of the employees. We talk a lot about shareholder value and the need to improve it, but there are other issues to be taken into account in the boardroom, and the employees will be able to assist with some of that.
I believe that this measure, although relatively limited, will go a long way to reinforcing some of the issues that were so important when the share incentive plan was first introduced. It is important to state here and now that the greatest benefit of the changes that were made in 2000 is to recognise that all employees must be included. One of the great failings and shortcomings of some of the previous measures was that certain groups in the company benefited from those measures, rather than everyone. All the studies show that, if we stand by that principle and involve everyone, company performance improves by far more than if wider share ownership is limited to specific groups in the company.
Performance is important because competitiveness is important. We talk continually about having a more competitive market. That is critical, not only in the United Kingdom but internationally, where we face considerable competitive pressures.
At the end of the day, what we are really in favour of is getting increased productivity. We hear a lot of criticisms about productivity. I notice that in recent months productivity has improved significantly. I welcome that and wish to see it enhanced. This Bill will go a long way to assisting that process.
I commend the Bill, a relatively small measure, but one that will reinforce all the issues that are so critical to the future of the company and of British industry. I congratulate my hon. Friend the Member for Edinburgh, North and Leith on bringing the measure before us.