Government Supports MP's Share Incentive Bill

by Jason Gorringe, Tax-News.com, London

21 January 2002

The House of Commons has given a first reading to a private member's bill which will improve the tax regime for share incentive schemes in UK companies. The Employee Share Scheme Bill, which was first put forward by the Co- operative movement, has the backing of the TUC and the Industrial Society.

Mark Lazarowicz, Labour MP for Edinburgh North and Leith, introduced the bill, which will allow elected employees to become members of trusts running incentive schemes, and will allow companies early corporation tax relief when they buy large blocks of their shares on behalf of staff in the scheme.

Mr Lazarowicz said: "The wider the degree of employee ownership and employee control, the better the results for the businesses and for the employees. This Bill, if passed, would be a modest but significant measure to promote active employee ownership. All the evidence is that employee control, whether by means of employee share ownership, or other methods such as the traditional worker co-operative, brings real benefits to the businesses which introduce them and to their employees."

The Government agreed to support the bill, thus more or less guaranteeing its success, in return for the removal of a section which would have extended the scheme to trusts and charities. Ministers said partnerships would have to create a new type of share to qualify for the scheme and that could leave staff vulnerable to being sold worthless shares.

David Lidington, a shadow Treasury Minister, said: "It is good for employees to have a material stake in the success of their employer. Companies themselves benefit when they are able to unlock the enthusiasm, creativity and ideas of their own workforce."

Edward Davey, for the Liberal Democrats, said: "This legislation is not about giving a quick buck or a quick profit to employees. The objective is to make sure the interests and visions of employees and employers come together for the future benefit of the company and economy."

The measure would extend tax benefits of employee share ownership, in particular to firms that give their staff a role in decision-making including the John Lewis Partnership and the Arup Group.

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