Greenbury Report

HC Deb 17 July 1995 vol 263 cc1311-22 3.31 pm

The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Ian Lang)

With permission, Madam Speaker, I would like to make a statement about the report of the study group on directors' remuneration, chaired by Sir Richard Greenbury, which was published today.

The group was set up in January this year, on the initiative of the Confederation of British Industry, in the wake of public concern about executive remuneration in some public limited companies. The Government supported the setting up of the group and we now welcome the publication of Its report. We congratulate the group on a thorough, speedy and authoritative review of the issues. We welcome its recommendations in principle, and strongly support the emphasis that the group places on the need for pay to be justified by performance.

The group's report follows shortly after the report by the Select Committee on Employment on the remuneration of directors and chief executives of privatised utilities. While the Government will give a considered response to both reports when Parliament resumes after the recess, the House will expect me to make some preliminary comments now, and I willingly do so.

Pay in the private sector is a matter for companies and their shareholders. The Greenbury initiative demonstrates that companies and institutional investors recognise the level of concern on the issue and are determined to act. There is no doubting the authority of the group's recommendations. The group's report vindicates the self-regulatory approach. It will deliver more effective, speedier results than legislation could achieve. Indeed, there has already been a perceptible change in some companies' attitudes to those matters.

The Greenbury report will be underpinned by action by the stock exchange. Its recommendations are addressed primarily to listed companies. It is appropriate therefore that the stock exchange should enforce them through the listing rules. The Government welcome the stock exchange's announcement this morning that it will do so.

The Government have no intention of introducing a top people's pay policy. We do not begrudge top salaries for top performance. Our companies must compete at world level if our nation is to prosper. We must pay the rate for the job. Greenbury points out that although comparisons are difficult, total remuneration levels in the United Kingdom are well below American levels and broadly comparable with other European countries. The fastest way to drive our best talent abroad—in any field, not just business—would be to impose restrictions on earnings.

There has been particular concern about windfall gains arising from share option schemes in the privatised utilities. The Government accept the group's recommendation that for newly privatised companies, no share options should be made available until at least six months, and preferably a year or more, after privatisation.

The great success of virtually all the privatisations of recent years has been a feature of the strengthening of Britain's economy. Consequently, some share options have yielded substantial benefits to those who guided that success. But the huge achievements of the privatisation programme have also brought dramatic benefits for consumers in terms of lower prices, more choice, better consumer-focused service and more investment, as well as a large and growing flow of revenue to the Exchequer through taxation.

There are three recommendations for legislative action addressed to Government. My right hon. and learned Friend the Chancellor of the Exchequer has already announced this morning that the Government will introduce legislation in the next Finance Bill to withdraw the income tax reliefs at present available to directors and employees participating in executive share option schemes that have been approved by the Inland Revenue. The withdrawal of the reliefs will take effect in relation to grants or the exercising of options on or after today.

The second and third recommendations are for minor amendments to the Companies Act, to remove overlap with the group's proposals for comprehensive disclosure and to amend the Companies Act rules on the disclosure of the value of pensions benefits, when they have been drawn up by the actuarial professional bodies. The Government will consider both recommendations carefully and quickly. We remain willing to consider other legislative back-up if experience shows that it is needed.

In summary, the Government welcome the publication of the Greenbury group's report. It is comprehensive and well judged. It will help to ensure that pay is based on performance. It tackles specific problem areas with firm, fair and practical proposals. It is a package that meets today's needs, and I believe that it should be supported.

Dr. John Cunningham (Copeland)

I begin by taking this first opportunity to congratulate the right hon. Gentleman on his appointment as President of the Board of Trade. Of course, he took over from the right hon. Member for Henley (Mr. Heseltine), who has become a kind of Prime Minister-in-waiting. He is not here today, we notice; no doubt he is staking out No. 10 Downing street, the great panjandrum of this decrepit Government. If the right hon. Member for Henley had been half as successful in creating jobs for the British people as he has been with his personal job creation schemes, unemployment in Britain would be much lower than it is today.

We are, however, delighted to see the Chancellor of the Exchequer in his place. After all, it was he who, over many months, dismissed our calls for share options to be taxed as income. On 8 December last, the right hon. and learned Gentleman said: The hon. Gentleman's proposals"— referring to my hon. Friend the Member for Dunfermline, East (Mr. Brown)— on loopholes are undesirable changes in taxation on legitimate business. I have considered his proposal on executive share options many times".—[Official Report, 8 December 1994; Vol. 251, c. 474.] But he rejected it. It is little wonder that the right hon. and learned Gentleman was seen practising somersaults in the garden of No. 11 Downing street early this morning. He has opposed these proposals for many months, but we are now led to believe that he is anxious and willing to introduce them.

Does not the President of the Board of Trade recognise that, had Labour not demanded action and had Labour not reflected the understandable anger of repeatedly exploited consumers, the Government would have done nothing, as the right hon. and learned Gentleman intended? Incidentally, that is also what the former President of the Board of Trade intended, as a leaked memo in March from his office to the Prime Minister made clear. It stated that the President was loth to take action. That was the true position of the Government until the Greenbury report appeared. They have in no sense reflected the public anger or the outcry that followed the many abuses.

Before the right hon. Gentleman tries to fabricate Labour policy, let me say that we have always recognised that high performance merits high reward—[Laughter.] But the reality is, and Conservative Members know it, that the rewards given by their friends and themselves to the directors of privatised monopolies bear no relation to their individual performance or merits, or the performance of the organisations. Indeed, as everyone knows, the gap between executive pay and lower pay is as wide as it has ever been. The Government have a curious philosophy that directors must be given much higher rewards to motivate them, but people on low and middle incomes must have their wages controlled to motivate them.

The Greenbury report has some welcome proposals. I believe that Sir Richard would have gone further, but members of the committee stopped him. The draft report was offered in traditional Marks and Spencer fashion—those who did not like it could take it back and change it, and they did repeatedly.

Complete transparency on salaries and pensions is welcome, as is the relation of bonuses to performance criteria. It is right that the stock exchange must be obliged to enforce the code of practice, and its decision to do so is welcome.

However, does not the Minister recognise that the report ducks the crucial issue—the issue of abuses of private monopoly power, of the need for a truly independent member on each remuneration committee, the need for shareholders to have a legal right to vote on remuneration packages at annual meetings, the need for the abolition of all share options in privatised utility companies and the need for self-regulation to be changed, as it has clearly failed and not protected consumers from those many abuses in those privatised industries?

The Greenbury report ducks the crucial issue of share option rip-offs and huge salary hikes in exactly the industries where they have been the most outrageous. Greenbury recommends a voluntary review, which the Minister has welcomed; a voluntary review by those who made themselves millionaires at our expense in the first place. Does the right hon. Gentleman—does anyone in the House—believe that those guilty of those abuses of private monopoly power will confess? Are they likely to reduce their salaries and their share options? It beggars belief that they will do so, so, frankly, the idea that self-regulation will end those abuses does not bear examination.

Does not the right hon. Gentleman also recognise that privatisation has left consumers wide open to abuse, exposed to the exploitation of private monopoly power; that the weak regulatory regime has manifestly failed to protect consumers? Does not he recognise that those abuses are set to continue and that those massive personal gains will continue, as the memorandum from his predecessor to No. 10 Downing street, from which I quoted earlier, confirms? It also confirms, in case he has not read it, that none of the options is related to performance (either of the company or the individual). What more evidence do we need than his predecessor's own confession to the Prime Minister that none of that can be justified?

No notice has been taken at all by people in PowerGen, National Power or water companies of the public outrage that followed those abuses. The evidence is there—they do not intend to change their practices, and the right hon. Gentleman knows it. Indeed, in the case of British Gas, total factor productivity has been stagnant for several years, but that did not prevent the chief executive officer from giving himself a 75 per cent. pay rise, bearing no relation to the performance of the organisation.

Is the right hon. Gentleman aware that the conclusion that he has reached—that the report is welcome—will not be welcomed outside the House by consumers, who are fed up with being exploited and fed up with the Government's failure to act? Those issues will continue to infuriate consumers until the next general election. The Government's failure to end those abuses, like their broken promises on tax, will be neither forgiven nor forgotten.

Mr. Lang

I thank the right hon. Member for Copeland (Dr. Cunningham) for his welcome to me in my new position.

The right hon. Gentleman asked about the handling of share option schemes and why my right hon. and learned Friend the Chancellor resisted any change in taxation in the past. The answer is perfectly simple. Share option schemes were introduced in 1984 for senior executives, with the tax arrangements that have just been changed, to provide a long-term incentive for senior executives to become involved in privatisation exercises and make them a success. What is more, those schemes were introduced at a time when we had not completed the process of reducing the income tax levels that we inherited from Labour. We have now made considerable progress in that regard, and the privatisations are now mature and successful. The value that attaches to share option schemes is a direct consequence of the substantial contribution made by senior executives to the successful operation of privatised companies.

The right hon. Gentleman said that he believes that pay should reward performance. I remind him that it is hardly credible for him to say that, when his party is committed to a windfall tax on excess profits of privatised utilities, a training tax on employers and the introduction of a minimum wage. The right hon. Gentleman would clearly also introduce a maximum wage. Labour is going step by step towards the introduction of a full wage policy at all levels. Conservative Members know perfectly well that that is Labour's true aspiration.

Only today, the Full Employment Forum, as it calls itself—a body of 60 Labour Members of Parliament and Members of the European Parliament—called for a higher tax rate of 50p in the pound on all individuals earning £50,000 and more.

The right hon. Gentleman talked about monopoly. He does not seem to realise that since the gas industry was privatised, it has moved from being a monopoly to an industry of 42 companies, and 44 companies are engaged in supplying electricity. That competitive element in the provision of utilities has led to substantial advantages for the consumer—whom the right hon. Gentleman says we are not protecting. He might have forgotten that BT's main prices have fallen by 35 per cent. after inflation since privatisation, and that domestic gas prices have fallen by around 23 per cent. since privatisation.

Perhaps the right hon. Member for Copeland is not aware that the right hon. Member for Sedgefield (Mr. Blair) travelled to the far ends of the world to make a speech to the News Corporation leadership conference in Hayman Island, Australia, when he said: Our parliamentary system is hopelessly outdated. There is, believe it or not, still prejudice against success in trade and business. What a pity that the right hon. Member for Sedgefield, in e-mailing himself down the, Internet to Australia, forgot to fax a copy of his speech to members of his Front Bench at home. The fact is that Labour does not admire success, but is interested only in state control. That is not in the interests of consumers or shareholders.

Mr. David Shaw (Dover)

Will my right hon. Friend confirm that the tax changes proposed by my right hon. and learned Friend the Chancellor will not impact on the secretaries, office workers and shop floor workers in my constituency who have taken share options? Does my right hon. Friend acknowledge that many shares go to ordinary employees on average wages?

Mr. Lang

I am happy to reassure my hon. Friend. Labour does not like and does not choose to recognise that there are 10 million shareholders, and 6 million shareholders in privatised industries. If Labour's alleged recognition of enterprise were to be believed, one would think that it would welcome those figures.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

The package is acceptable as far as it goes and disclosure will be helpful, but does the Secretary of State acknowledge that small shareholders will still be powerless? Will he introduce a new charter, to give them the authority to approve directors' packages? Will he confirm that, even after the Chancellor's new initiative in changing the tax regime that applies to such packages, the fat cats will have to pay only an extra £2,400? Surely that is small beer in terms of the losses and gains seen in the recent past.

Mr. Lang

The hon. Gentleman calls for a charter. If he reads Sir Richard Greenbury's report, he will see that it clearly sets out a code of best practice and makes a number of substantial recommendations—the majority of which are being taken up by the stock exchange and made obligatory under the listing rules. That not only greatly strengthens shareholders large and small, but sets down a code of practice that all companies will be expected to operate.

Mr. Michael Stephen (Shoreham)

Were any requests received from the Opposition parties to widen the scope of the Greenbury inquiry to include the pay and perks of journalists, television personalities, pop stars and professional sportsmen?

Mr. Lang

My hon. Friend makes an extremely good point. It is wrong for the Labour party to abuse and describe as fat cats those in the City whose skills and professionalism are admired throughout the world and which generate so much enterprise, revenue and employment in this country.

Mr. Greville Janner (Leicester, West)

In welcoming the right hon. Gentleman to his post, may I welcome the parts of the Greenbury report that reflect the views of the Labour minority and reject those of the Tory majority? Has the right hon. Gentleman read the Employment Select Committee report? Has he any comments to make now on that report? As I presume that he has read the Richard Greenbury report, does he unequivocally agree with all the recommendations and remarks contained within it?

Mr. Lang

The hon. and learned Gentleman is familiar with these matters because he is a long-standing member of the Ladbroke Group plc board's remuneration committee, which recently approved the chairman's salary of £583,000 and a share option package for directors worth £2.3 million. I welcome the hon. and learned Gentleman's participation in the discussion.

I have read the Employment Select Committee report. I shall ensure that we reply to it, as I said in my statement, in the autumn. The hon. and learned Gentleman asked me whether I agreed with every detail and point in the Greenbury report. I have said that we welcome the report in principle, agree with most of its recommendations and will respond fully in the autumn.

Mr. Spencer Batiste (Elmet)

May I ask my right hon. Friend to take the opportunity to reject utterly the concept of a statutory wages policy, which would be the inevitable outcome of the comments of the right hon. Member for Copeland (Dr. Cunningham)? Is not the real issue the need to encourage the representatives of large institutions to take a much more active role in companies, and to find ways of enabling them to do that, which will not lead them into running foul of the necessary rules against insider trading?

Mr. Lang

My hon. Friend makes a valid point. Institutional shareholders are investors who seek to make a profit, just as small individual shareholders do. The fact remains that they have substantially more voting power. They tend to hold their shares for longer and they are in a position to exert greater influence. It behoves them to use that power responsibly, as many of them do. It is a matter that I shall be considering further.

Mr. Richard Caborn (Sheffield, Central)

Will the President of the Board of Trade give a clear answer on the voluntary code and the role that is being barred to shareholders? Will he introduce some checks and balances into the system? Those outside this place consider that to be important.

Have the Government any plans to examine the corporate government of companies, especially in regard to institutional shareholders? Will they take all stakeholders into account, especially when it comes to competitiveness? That issue has been raised on several occasions by the Select Committee on Trade and Industry.

Mr. Lang

The hon. Gentleman will have heard my reply to my hon. Friend the Member for Elmet (Mr. Batiste) about institutional shareholders. As for the code of best practice, I urge the hon. Gentleman to read the recommendations in detail to understand how they interrelate. He will then appreciate that the importance of the remuneration committee is considerably enhanced. There is a far greater requirement for disclosure, accountability and transparency. I think that that will be of considerable advantage to all shareholders.

Mr. Bill Walker (Tayside, North)

Does my right hon. Friend realise that many people will be delighted at the Government's quick action? There was genuine concern and it will be welcomed especially that the remuneration committee, under the code of practice, will not contain people who will step up one another's salaries to suit one another. That is important, because it gives confidence. May I be the only consumer in this place who is delighted with British Gas and the service that it has given me in my new house?

Mr. Lang

My hon. Friend makes his point well. I welcome his support for British Gas. Board pay at British Gas accounts for about 15p per consumer per annum. The savings that British Gas has achieved for consumers are equivalent to £77 per annum. Those figures alone justify the level of remuneration that a company the size of British Gas has chosen to set.

Mr. Ken Eastham (Manchester, Blackley)

Has not the President of the Board of Trade omitted to mention the mistakes and mismanagement that Greenbury found on investigating some of the carryings-on in certain utilities? Is it not a fact that some of the top cats currently under investigation were members of the 11-member committee? Has it not been said that small shareholders should have more of a say at annual general meetings before massive increases are paid? Sir Iain Vallance—a top man—was paid £50,000 to do a little job for 18 days a year, along with another £665,000; another director of a utility was paid £465,000 a year, plus £500,000 worth of share options and £38,000 to do three little jobs for three days a year. Should not the right hon. Gentleman be considering those issues?

Mr. Lang

Perhaps the difference between the Opposition and the Government is that we believe that committees should be manned by people who know something about the subject, rather than just by those with prejudices about it. As for the hon. Gentleman's point about the position of small shareholders, I have noted the point made in the Select Committee's report about the circulation of motions for the annual general meeting, and we shall of course consider it.

Mr. John Wilkinson (Ruislip-Northwood)

Does my right hon. Friend agree that, in the context of performance, one aspect of a director's responsibilities is the ability to exercise self-discipline and restraint, and to understand what is acceptable to employees as well as shareholders? Is it not important for Her Majesty's Government, in all dealings with the utilities, to encourage directors to exercise that responsibility?

In the context of international relativity, is it not also essential for Her Majesty's Government to continue to reduce direct taxes on income, so that international entrepreneurs and directors will want to make a living in this country?

Mr. Lang

I agree with both those points. When making international comparisons, however, it is important to recognise that many top managers have skills that could easily be transported to other countries. In Germany, France, Belgium and Italy, pay levels are slightly higher than in this country; in companies of comparable size in the United States, pay is twice as high as it is here. Our directors must also take that into account.

Dr. John Marek (Wrexham)

Has it occurred to the President of the Board of Trade that, following the fiscal changes, a chairman of a privatised utility who was taking home £300,000—perhaps in the form of share options—will take home £297,000? Less than 1 per cent. of his salary will have been taken away. The employees at the bottom of the scale, to whom the hon. Member for Dover (Mr. Shaw) referred, however, may lose as much as 25 per cent.

If the right hon. Gentleman has reflected on that, will he also reflect that all the huge, unjustified payouts by chairmen of former nationalised industries to themselves and their directors are just a little like what happened in "Animal Farm"—the bit where the pigs have taken control?

Mr. Lang

Obviously, the circumstances of individual directors will vary according to their salary levels, the size of their share option schemes and their circumstances in relation to both income tax and capital gains tax. The hon. Gentleman's figures are meaningless. If he feels that the change that my right hon. and learned Friend the Chancellor has made to the tax system is inadequate, however, why on earth have his hon. Friends bayed for it over recent months?

Mr. Michael Fabricant (Mid-Staffordshire)

Will my right hon. Friend pass on my congratulations to our right hon. and learned Friend the Chancellor on reacting so quickly this morning by altering Companies Act legislation? Is it not typical of Labour Members that, if my right hon. and learned Friend had not made his statement, they would have criticised him for doing nothing; but, now that he has responded quickly to the Greenbury committee—as he said that he would—they say that he has performed a somersault? Is not that ridiculous?

Mr. Lang

My hon. Friend is absolutely right. I can reassure him that we shall also urgently consider the other two matters for which legislation is recommended, on the disclosure of salaries in company accounts and the disclosure of pension benefit levels.

Mr. D. N. Campbell-Savours (Workington)

Is not it true that a small number of directors and executives of privatised utilities are now carrying stock share options that are worth more than £100 million—I repeat, £100 million? Will they simply be free to exercise those options, which none of them has earned? What about last week's events? We understand that some directors were able to exercise options in advance of the announcement, on the basis that they were given insider knowledge. What does the Secretary of State have to say about that as well?

Mr. Lang

I have no knowledge of any insider knowledge having existed. If the hon. Gentleman has any evidence of that, I hope that he will send it to me. The share options are valuable because the value of the companies rose as a result of the efficiency with which they were run after they were able to cast off the yoke of nationalisation. Privatisation, in almost every company that has had the benefit of it, has been a triumphant success. I was asked about the issue of existing share option commitments. If the Labour party is recommending that contracts and contractual arrangements that are already entered into should be ridden over roughshod and broken, I disagree.

Mr. Harry Greenway (Ealing, North)

Does my right hon. Friend agree that, if Greenbury's recommendations and the Employment Select Committee's majority report are implemented, remuneration, especially of executives of privatised industries, will be transformed? I note my right hon. Friend's important point that those industries have delivered substantial price reductions. Will he keep an eye on the situation and be prepared to act again if that is needed? Will he ignore the Labour party's constant efforts simply to encourage spite and envy, which is dangerous, damaging and very silly?

Mr. Lang

I am happy to give my hon. Friend the assurance that he seeks. Of course I shall continue to keep an eye on the situation. However, I think that the implementation of the Greenbury recommendations will bring about a substantial improvement.

Ms Angela Eagle (Wallasey)

Will the Secretary of State now acknowledge that the public outcry about these excesses is genuine and is based not on envy but on anger, and that the Greenbury proposals will do almost nothing to assuage that anger, because they will not deal with the problem? What will he do to end the absurdity of the block vote system at annual general meetings? Mr. Giordano exercised 3 million block votes to give himself a huge increase and override the wishes of everybody at one such meeting.

Mr. Lang

The hon. Lady obviously knows all about block votes. There is a principle of one share, one vote, and that seems extremely fair. On the issue of voting, perhaps the hon. Lady should reflect on the outcome of the Labour party's Scottish conference in March, which on one day voted to abolish clause IV and on the next voted to renationalise every public utility.

Mr. Jacques Arnold (Gravesham)

My right hon. Friend will, of course, bear it in mind that tens of thousands of ordinary employees have share options and will know that when they exercise them, their gains fall well within the £6,000 capital gains tax threshold. Will he avoid the trap into which the Labour party has clearly fallen and which would hit ordinary employees? Will he ensure that if there is any switch to income tax, that allowance will be kept intact for ordinary people?

Mr. Lang

My hon. Friend makes a good point. I am sure that the public will notice Labour's commitment to abolish share option schemes. So much for Labour's commitment to enterprise. Some 6 million shareholders have secured their shares as a result of privatisation. The vast majority of those people are small shareholders who have a stake in their company and in the future of their enterprises. Conservatives are determined that they will have the benefit of that.

Mr. Tony Banks (Newham, North-West)

Who chose the members of this remuneration study group committee? Why were there no women on it and no representatives of the consumer's interest? Why did it not have an employees' representative? Why was it made up entirely of big nobs from big business, people who earn millions from salaries and options every single year? How can the public have any faith in this? All that has happened is that the fat cats have been put in charge of the creamery.

Mr. Lang

The members of the committee will note what the hon. Gentleman thinks of their skills. The chairman of the committee, Sir Richard Greenbury, runs one of the most efficient companies in the country, which is a considerable advantage to consumers. He took a cut in his salary last year, reflecting the circumstances of his company. Indeed, the entire board of Marks and Spencer pays itself less than it gives to charity every year. The qualities and experience of the men on the committee formed the right mix to bring to bear the knowledge that was needed to get a worthwhile and sensible report, which is what we have.

Mr. Edward Garnier (Harborough)

Will my right hon. Friend confirm that the Greenbury report will have no bearing on the Government's policy of reducing income and capital taxation as soon as it is prudent to do so?

Mr. Lang

My hon. and learned Friend will have heard what my right hon. Friend the Prime Minister and my right hon. and learned Friend the Chancellor have said on that matter on many occasions.

Mr. Ernie Ross (Dundee, West)

The President of the Board of Trade said that he had read the report by the Select Committee on Employment. Will he confirm that the main recommendations that Greenbury came out with over the weekend are not to be found in the majority report, which was supported by his hon. Friends, but are contained in the minority report produced by me and my colleagues, the Labour members of the Employment Select Committee? As people are watching our discussions, will he correct the statement that he made earlier, which was that Labour was out to abolish share options? The Labour party has said that it is opposed to executive share options and that if executives have share options, they should be taxed as income.

Mr. Lang

In other words, the hon. Gentleman is narrowing down the qualification to say that Labour is opposed to share option schemes only for some people, preferably those who are most efficient and most senior in their companies and who have most to offer to the management of those companies. I doubt whether that will impress executives or employees.

Mr. John Marshall (Hendon, South)

Will my right hon. Friend join me in welcoming the proposal that service contracts should not last for as long as they have historically? Does he agree that the real scandal in the City is the compensation paid to the incompetent rather than the salaries paid to the successful? Does he also agree that the politics of envy, the proposals for a minimum wage and the proposals for a maximum salary demonstrate which party is not the heir to Thatcherism, is not a believer in the market economy and hankers after the controls that hindered this country so much in the 1970s?

Mr. Lang

I agree with my hon. Friend's latter points; he has also hit on a good point about compensation. One of the reasons why shorter contracts are now in contemplation is to avoid the excessive compensation payments made to people who have turned out not to be up to the job.

Mr. Jeremy Corbyn (Islington, North)

Will the Secretary of State confirm that the 11 members of the Greenbury committee have a total salary, excluding share options, of well over £4 million? Does he agree that nobody should take seriously anything that this group says, because it is merely trying to protect the interests of the already very rich? If it is good enough for the very rich in industry to be paid the going rate for the job, why is the Secretary of State so opposed to the train drivers getting a decent increase for the responsible job that they do in ensuring the safety of the public and the efficiency of our railway network?

Mr. Lang

People should be rewarded according to their performance. There is no doubt that the quality of the members of the Greenbury committee justifies their level of salary. One needs only to look at the success of their various companies to see that.

Mr. Peter Hain (Neath)

Is not this report simply a charter for the fat cats to keep purring contentedly? Is not the self-regulatory ethos deeply flawed and has it not failed in the past? Does not it contrast extremely starkly with the ruthless regulation of the remuneration of teachers, nurses, train drivers and others who really make this country work?

Mr. Lang

Perhaps the hon. Gentleman should look at the words of his hon. Friend the Member for Edinburgh, Central (Mr. Darling), whom I see in his place. He said in February this year: We believe that people should be rewarded for improved performance whether in the form of increased salary or the granting of options. What a pity it is that that enlightened view does not stretch to the hon. Gentleman's Back Benches.

Mr. Richard Burden (Birmingham, Northfield)

Surely when the President of the Board of Trade seeks to equate the scandal of executive share options with the share offers that have been made available at various times to ordinary employees of privatised utilities, he is aware that there is little comparison between the two, either in terms of the nature of the schemes or in terms of their value. Some of the greatest outrage about executive share options has come from those self-same employees. If he believes that senior executives must have their loyalty to their companies won by being paid millions of pounds, why does he not take the same view about ordinary employees?

Mr. Lang

The Greenbury committee makes a number of recommendations about future share option schemes. I welcome the fact that it is keen to encourage long-term shareholdings. It is also keen that all long-term incentive schemes should be approved by shareholders, that the discounting of share options should be stopped, and that share option schemes on new privatisations should not be introduced for six months, or preferably a year. All those measures will improve the relevance and efficiency of share option schemes and remove some of the excesses that have caused so much concern.

Mr. Geoffrey Hoon (Ashfield)

Will the President of the Board of Trade explain the precise legal means that the Government have employed to ensure that share options are taxed as income rather than capital with immediate effect? Will he also explain whether the benefit to the individual taxpayer will be taxed in the financial year in which the option is exercised or whether the taxpayer will be allowed to spread the benefit over the period from when the option was originally granted?

Mr. Lang

The change will be made in the forthcoming Finance Bill and the hon. Gentleman must wait for its publication to have his question answered.

Mr. David Evans (Welwyn Hatfield)

rose—

Madam Speaker

I watch very carefully to see which hon. Members come into the Chamber after a statement has been made. May I ask the hon. Member for Welwyn Hatfield (Mr. Evans) whether he heard the entire statement?

Mr. Evans

I did, Madam Speaker.

Madam Speaker

In that case, I will hear the hon. Member.

Mr. Evans

Is my right hon. Friend aware that, during the recent Labour leadership election, the right hon. Member for Sedgefield (Mr. Blair) received £79,000 from three London Weekend Television directors who earned their money from share option schemes? Does not he think it a bit rich that the lot opposite should criticise us when their own leader was elected on the back of share option schemes?

Mr. Lang

My hon. Friend is absolutely right. We keep hearing about new Labour, but what we have seen and heard today is old Labour, which is full of envy and spite towards success and enterprise, and cannot resist interfering, regulating, legislating and controlling. Old Labour would reduce this country, as it did before, to impoverishment and high unemployment.

Dr. John Cunningham

Is it not revealing that from neither the Government Front Bench nor Back Benches have we heard one word of condemnation of the manifest and widespread abuses of salary hikes and share options in the privatised utilities? Is it not the same story in respect of their attitude to Lloyd's, for example? Once again, they have refused to take action to end abuses in Lloyd's, even though Lloyd's management has asked them to do so.

Before the right hon. Gentleman continues to misrepresent what we have been saying, will he acknowledge that I said that share options for directors of privatised utilities should be ended, not all share options, as he inadvertently claimed a few moments ago? If he reads our published statement to Greenbury and elsewhere, he will see that it is clear that we recognise that remuneration should be related to performance and that people who perform well are entitled to be well remunerated.

Mr. Lang

I shall study Hansard with great care. As for action to end abuses, that is exactly what the Greenbury committee was set up to do and what its report and recommendations should do.

On the right hon. Gentleman's commitment to enterprise, the Labour party talks in its new clause IV about the rigour of competition and a thriving private sector, but its every word and action today shows that it means the opposite.