The debate began with discussion around employee shareholders and the amount of tax they should pay on shares. Lord Flight (Conservative), proposed Amendment 49C, saying: ‘I have always been a strong supporter of employees owning shares in the companies that they work for, particularly smaller companies. In my own history, virtually everyone had shares in the company that I built up in the 1980s and 1990s. Obviously, the principle is observable in groups like John Lewis. It is self-evidently very positive, not just commercially but when people feel part of the business for which they are working.’
He continued: ‘The limit of only 2,000 shares on which you do not pay tax is too low. There is complete misthinking by the Treasury. Without this legislation, there would be no additional tax whatever because no one would have any more shares to pay any tax on, so it is not a question of losing tax revenues, but of the potential for forgone tax revenues that would not exist if the scheme did not exist.’
The Earl of Erroll (Crossbench) followed, saying: ‘If the clause is to stay in the bill, the amendment improves it greatly. The clause will then achieve its purpose of trying to get employees involved in the running of the company and the drive to make that company succeed. However, if they cannot afford to take up the shares because of the tax regime... it will just fail anyway’
The amendment was withdrawn after the parliamentary under-secretary of state for the Department for Business, Innovation and Skills, Viscount Younger of Leckie (Conservative), said: ‘In practical terms, the cost to the Exchequer of pursuing this amendment would be prohibitive. A tax relief of that sort of magnitude would make it necessary to attach a great many prescriptive rules to ensure that benefits were targeted and to prevent abuse: for example, by businesses using it as a means of transferring taxable income into employee shareholder shares.’
Discussion then moved on to Amendment 50, proposed by Lord Pannick (Crossbench), who said: ‘Your Lordships now come to whether Clause 27 should stand part of the bill. As noble Lords have heard, the clause allows for an agreement by which an employee can receive shares worth £2,000 or more at the date of issue and then lose his or her rights to claim unfair dismissal, statutory redundancy pay and other employment rights.’
He set out a number of objections to Clause 27, including: ‘The absence of protection for the job applicant means that Clause 27 does not simply allow for an agreement to give up employment rights. In practice, it imposes on the jobseeker considerable pressure to take employment on Clause 27 terms. Clause 27, read with the guidance, will mean that the jobseeker is being made an offer which he or she cannot refuse-an offer that they must give up their employment rights.’
Baroness Brinton (Liberal Democrat) followed, saying: ‘I remain bemused with the basic philosophy behind the clause. We are told that the scheme is aimed at small businesses that want to grow fast and motivate their workforces. We have heard that employees will take a significant reduction in their employment rights and face tax and NI demands on the free shares that they have been given over £2,000 as they receive them.’
Baroness Turner of Camden (Labour) outlined her support of the amendment, saying: ‘I do not think the government will succeed with this. Good employers do not like it. Shareholding schemes already exist in some enterprises without workers having to give up employment rights in order to participate-the John Lewis Partnership is one such enterprise. This clause is backward-looking and dishonest.’
The amendment was put to a vote which resulted in 232 for and 178 against.
Third reading, a final chance to amend the bill, is scheduled for 26 March.
Previous stages of the Growth and Infrastructure Bill
What is report stage?
Report stage gives all members of the Lords further opportunity to examine and make changes, known as amendments, to a bill.
Report stage usually starts 14 days after committee stage. It can be spread over several days (but usually fewer days than at committee stage).
Before report stage starts, all member's amendments are recorded and published. The day before a report stage discussion the amendments are placed in order - a marshalled list.
During report stage detailed line by line examination of the bill continues. Any member of the Lords can take part and votes can take place.
After report stage the bill is reprinted to include all the agreed amendments.
The bill then moves to third reading for the final chance for the Lords to amend the bill.
Growth and Infrastructure Bill summary
The bill looks at the following areas:
- the use of infrastructure
- the carrying-out of development, and the compulsory acquisition of land
- how rating lists are to be compiled
- the rights of employees of companies who agree to be employee owners.