HC Deb 30 October 1997 vol 299 cc1013-5
5. Mr. Fabricant

If he will make a statement on Her Majesty's Government's policy concerning the taxation of profit-related pay. [12652]

Mr. Darling

We believe that profit-related pay should be taxable, like bonus pay and other, similar forms of remuneration.

Mr. Fabricant

I thank the Minister for his answer. Does he recall that, before the general election, his right hon. Friend, the current Prime Minister, visited John Lewis in Oxford street and said that it was a good example—as is the whole John Lewis Partnership—of a stakeholding society? Does he also recall—as far as I recall he was not present in the Committee considering the Finance Bill immediately prior to the general election—that the Labour party spokesman on that Committee said that the Labour party would immediately restore profit-related pay? Is he aware of how betrayed the 34,000 members of the John Lewis Partnership and other such schemes feel because of the lie that we heard in that Committee? Will he now apologise to the members of the John Lewis Partnership and to others who formerly benefited from profit-related pay tax breaks for breaking yet another election promise?

Mr. Darling

If I set aside the hon. Gentleman's rather intemperate remarks, perhaps I can put him right on a number of matters. First, at no time did anyone in the Finance Bill Committee promise, on behalf of the Labour party, that profit-related pay would be restored. I can assure the hon. Gentleman that I was present and, as the then shadow Chief Secretary, had anyone said that, it would probably have been the last thing they would have said on behalf of the Labour party because of the cost involved. What the hon. Gentleman has said is simply not true.

Secondly, John Lewis has an excellent scheme and I am pleased that it has said that it will continue with it. The hon. Gentleman should not make the mistake of believing that a scheme will work only if there is a tax break to go with it. Many employers have schemes that do not rely on tax breaks. The final point that the hon. Gentleman might wish to bear in mind is that, as the parliamentary private secretary to the then Financial Secretary, he voted to abolish the profit-related pay scheme. Therefore, he is in no position to lecture us.

Mr. MacShane

I was present at all the sittings of the Finance Bill Committee and I can confirm what my right hon. Friend the Chief Secretary has said. If the hon. Member for Lichfield (Mr. Fabricant) had got his hair out of his ears, he would have noted that too.

I invite my right hon. Friend to address the question of employee involvement. Has he seen the remarkable evidence from the United States of the success of employee share ownership schemes? More than 10,000 companies, covering 11 million employees, are now owned partly or wholly by their employees. They are profitable, they are creating jobs and they are adding share value.

Could we have a little more enthusiasm from the Treasury, in contrast with the pathetic lip service paid by the previous Government to ESOPs—employee share ownership plans—on the need to get shares into the hands of employees and to get employees directly involved in the ownership and running of their companies?

Mr. Darling

I recall my hon. Friend's contributions on that subject during the Finance Bill—some of them were in Latin. Even though we may not have understood some of what he was saying, we could at least see the enthusiasm with which he said it.

The Government are keen to encourage employee participation in every possible way. We believe that it is very much a part of the stakeholder democracy. Companies that involve their employees, in whatever way is appropriate, ensure that their employees share in the success of their companies and feel part of the common effort. That is something we want to encourage. However, I repeat what I said to the hon. Member for Lichfield (Mr. Fabricant)—a tax break is not the only way to encourage that change of culture.