Profit Sharing and Share Option Schemes (Hansard, 10 June 1982)

§ Lord Monk Bretton
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ Lord Lyell
My Lords, information is not available in the precise form requested by my noble friend. However, under approved profit sharing schemes, shares were appropriated to 145,000 employees in the tax year 1979–80, which was the first year of operation of the legislation, and to 270,000 in the tax year 1980–81. For approved share option schemes, which were introduced by the Government in the 1980 Finance Act, the first full year of operation was the tax year 1981–82. Reliable estimates of the number of employees granted options in that year are that they are believed to exceed 50,000.

§ Lord Monk Bretton
My Lords, I thank my noble friend for that reply. May I ask him whether he is reasonably satisfied with the degree of increase in profit sharing that we have seen, bearing in mind the difficult time it has been for profits worldwide? Does he agree, now that we have better fiscal incentives, that care and thought are still necessary before the introduction of schemes which are tailored properly to the interests of the individual businesses concerned? May I also ask whether he can tell us how many profit sharing schemes were approved in 1979 and how many there are now in 1981–82?

§ Lord Lyell
My Lords, the answer to my noble friend's first supplementary question is, yes. I very much agree with the contents of his second question. In reply to my noble friend's third question, I understand that there were 30 approved schemes in 1979 and the latest total that we have is in excess of 440.

§ Lord Rochester
My Lords, are the Government prepared to consider suggestions as to how, through appropriate legislative means, still more share ownership schemes can be encouraged?

§ Lord Lyell
My Lords, we shall always be pleased to receive any comments, or any possible ameliorations, in respect of this scheme.

§ Lord Orr-Ewing
My Lords, can my noble friend consider seriously the suggestion from the Liberal Benches that the Government of the day should really look at the disincentives and the complexities, which are now necessary in share option schemes, and which appear to be derived from a desire by the Treasury to make sure that nobody gains anything worthwhile? Is it not an important part of industrial relations that share option schemes should be encouraged in every possible way, so that people have a greater interest in the company for which they work?

§ Lord Lyell
My Lords, we are seeking every possible way in which to publicise the ease of share option schemes for all employees in their own companies. Indeed, there are two very useful leaflets which are freely available from the Inland Revenue, one for the employees and one for the employers.

§ Lord Campbell of Alloway
My Lords, would my noble friend the Minister agree that it is appropriate that the Government should take a positive initative, not only as regards share option schemes but also as to guidelines for voluntary worker participation?

§ Lord Lyell
My Lords, the purpose of all profit sharing provisions, be they profit sharing schemes or share option schemes, is to encourage all employees to identify their own interests with those of the company employing them. This is the major objective of the Government.

§ Baroness Seear
My Lords, are the Government prepared to study the Loi Monory scheme in France, which would make a very considerable extension of share ownership throughout industry to people who do not at present have the advantages of sharing in the profits of industry?

§ Lord Lyell
My Lords, we are prepared to make further studies in the direction of the Loi Monory scheme, but we think that this concept breaks the essential link, in which we believe, between the employee and his own company. Nevertheless, we are prepared to study this French case to see whether there is anything which we could learn.

Lord Oram
My Lords, while we should recognise that profit sharing schemes make some modest contribution to democracy in industry, may I ask whether it is not a mistake to believe that they can make any really significant contribution, since worker shareholders can all too readily be outvoted by other shareholders? Is it not the case that democracy in industry can be found only in those enterprises which are operating on the basis of one shareholder/one vote, rather than on the basis of one share/one vote?

§ Lord Lyell
My Lords, I do not wish to enter into a philosophical argument. Nevertheless, I believe that the figures which I quoted in my original Answer to my noble friend's Question are indicative of the great success of the schemes that we have in operation at the moment.

§ Lord Monk Bretton
My Lords, may I ask my noble friend whether or not it is vital to achieve a proper balance in these matters: to preserve employees' security, which is the first thing they need, then to improve employee involvement and then to be careful to avoid discouraging the risk taker? Without the risk taker we are nowhere. Does not this necessitate the continuation of voluntary schemes, with fiscal aid, upon which the Government have embarked?

§ Lord Lyell
My Lords, the main thrust of all these profit sharing schemes is directed towards associating employees with their own companies. If there is any fiscal benefit, we believe that this is by-the-by. It is possibly an associate benefit. But the main thrust should be that the employee may associate himself and his savings with his own company.