Profit-sharing Schemes (Hansard, 13 May 1986)

§ Lord Sandys
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Secretary of State for Employment (Lord Young of Graffham)
My Lords, the preliminary discussions with employers and others foreshadowed in the Budget speech of my right honourable friend the Chancellor of the Exchequer should be completed by the summer. If reactions are sufficiently encouraging as to the practicalities and the potential benefits to the economy, the intention would be to issue a consultation document before the Summer Recess containing detailed proposals for a scheme for tax relief to encourage profit sharing.

§ Lord Sandys
My Lords, I thank my noble friend for that very encouraging reply. Can he assure the House that the document will include profit sharing within the industrial sector and perhaps linked also to other factors?

§ Lord Young of Graffham
My Lords, I am grateful to my noble friend. As I see it, there are three stages. First, we must see what are the initial reactions before a decision is taken to issue a consultation document. Then the consultation document will be issued and we shall see what happens as a result of the consequent discussions. After that my right honourable friend the Chancellor will make up his mind as to the steps he wishes to take; but I hope very much that what my noble friend mentions will be included.

§ Lord Barnett
My Lords, does the noble Lord the Minister recall the Chancellor's first Budget, in which he made what he thought was to be a strong case for fiscal neutrality; that is to say, company directors should not have complex matters intervening in their decision-making processes and they should not be burdened with tax incentives, which he sought to remove? Is it now the Chancellor's case, or the Government's case, that the principle of tax neutrality has been dropped or that it is different as between individuals and companies?

§ Lord Young of Graffham
My Lords, I am very appreciative of the noble Lord's memory, which goes back a long way and covers many Budget speeches. I think what the Chancellor is really doing is seeing whether there is a way in which we can encourage 1030 profit sharing so as to ensure that all sides of industry work together. That is a motive which has everything to commend it and if it requires a tax incentive for the first few years to introduce it, then so be it.

§ Lord Barnett
My Lords, is the noble Lord suggesting that this tax incentive will be for only a few years, or has the principle really changed?

§ Lord Young of Graffham
My Lords, I am suggesting that we have preliminary consultations; then we go for a consultative document; and then we see what reception we get. As in all things, it is as well to get to the end of the road before we judge what the whole matter is worth.

§ Lord Diamond
My Lords, can the noble Lord tell us the extent of the consultations; that is, with which bodies they will be held?

§ Lord Young of Graffham
My Lords, that will depend on the results of the preliminary consultations which are now taking place. If we want adequate consultation to take place, we must do two things. First, we must see what are the preliminary reactions and, secondly, my right honourable friend the Chancellor must make up his mind as to which bodies he will consult. The proposal yesterday met with a receptive response and I had hoped that your Lordships would be as receptive as the CBI and the TUC. If there is anything in this world that we must do, it is to accept change; we must not always be reactionary.

§ Lord Renton
My Lords, does not the remarkable success of the Government's policy in reducing the rate of inflation augur well for the outcome of these matters which have been mentioned?

§ Lord Young of Graffham
My Lords, I hope very much that the remarkable success of the Government's economic policies will augur well for the success of this proposal, as it will for all the matters on which the Government are engaged.

§ Lord Molloy
My Lords, is the noble Lord the Minister aware that it was in this country that the pioneers of the principle of profit sharing really established themselves? Would he not think it sensible and good to seek advice and guidance from the British co-operative movement, who were the authors of the entire principle in the whole wide world?

§ Lord Young of Graffham
My Lords, I have not the slightest doubt that my right honourable friend the Chancellor will go to the co-operative movement.

Lord Winstanley
My Lords, I welcome the Government's intention to give assistance in this form to this particular group of workers. However, will the noble Lord the Minister accept that if the Government do that—which we would welcome—they will then have an obligation to do something comparable for workers in the public sector such as nurses, firemen and prison officers, whose organisations cannot conceivably make any profits for them to share in?

§ Lord Young of Graffham
My Lords, I think we are looking at two entirely separate matters. We are looking at proposals for profit sharing which are first being put out for preliminary discussion so as to find a way in which workers, management and all industry can share future profits, perhaps in an effort to break the spiral of paying ourselves too much money. I must point out that of all the industrialised nations we have the worst record for paying ourselves above the going rate of inflation. I hope very much that the results of this proposal will bring to an end the 80-year period in which in industry the spirit has often been one of confrontation and not co-operation. That is an outcome we should all like to see.

§ Lord Boyd-Carpenter
My Lords, is the three-year limit on the duration of tax concessions absolutely firm, or will that point be included in the consultation process?

§ Lord Young of Graffham
My Lords, at the moment we are at the very early stage. I suspect that everything will be involved in the consultation process.

§ Lord Kilmarnock
My Lords, would the noble Lord not agree that proposals very similar to this were advanced in the Liberal yellow book of 1928? Have not the Government taken rather a long time to catch up?

§ Lord Young of Graffham
My Lords, I bow to the noble Lord's knowledge of the Liberal yellow book.

§ Lord Stallard
My Lords, will the TUC be involved in the preliminary consultation process?

§ Lord Young of Graffham
My Lords, yes; all parties will be.

§ Lord Peyton of Yeovil
My Lords, may I ask my noble friend to take care that this excellent idea is not buried under the tombstone of cumbersome procedures and tiresome restrictions?

§ Lord Young of Graffham
Yes, my Lords.

§ Lord Hatch of Lusby
My Lords, is the noble Lord not misleading the House on this issue? Was it not clear in the Chancellor's speech last night that he was not talking about profit-sharing? He was talking about dividing the wage between a basic wage and a supplement which would vary according to the profits declared by the company in any year. There was no question whatever that the profits themselves would be shared among the workers.

§ Lord Young of Graffham
My Lords, I am afraid that I fail to follow the noble Lord's question. I would merely say that I am not in any way misleading your Lordships' House.

§ Viscount Massereene and Ferrard
My Lords, may I ask my noble friend the Minister whether those sharing in the profits will also share in the losses if something goes wrong?

§ Lord Young of Graffham
My Lords, the essence of profit sharing is that it will be just that—sharing in the profits and also sharing in any resultant losses.

§ Lord Williams of Elvel
My Lords, will the noble Lord confirm that in its note to the National Economic Development Council the Treasury pointed out that the definition of "profit-linked income" would have to go down as far as the business and profit centre? If so, will he agree that this procedure involves the publication to interested parties, like employees, of disaggregated profit and loss statements for businesses and profit centres? Will he accept that this goes far beyond the present practice and present requirement? Will he also agree that some noble Lords opposite might well worry about the ability of management to manage in those circumstances?

§ Lord Young of Graffham
My Lords, I suspect that the result of the consultative process will be that in talking about profit-sharing we shall be talking about profit-sharing within particular profit centres and that means going down to particular profit centres. But I hope that no one on my side of the House, or anyone in your Lordships' Chamber for that matter, need worry about the future ability of managers to manage.

§ Lord Rochester
My Lords, what is the noble Lord's response to the criticism that the Government's proposals fail to make adequate provision for employees to receive information on matters of concern to them as employees, or to be consulted when decisions affecting their interests are taken?

§ Lord Young of Graffham
My Lords, we are at a very preliminary stage indeed, and I think it would be as well to see whether it goes further and, when it goes further, to look at the results of these consultations before we start looking at detail.

§ Lord Hatch of Lusby
My Lords, the noble Lord did not understand my question. May I ask him to consult with his right honourable friend the Chancellor of the Exchequer, who last night on television quite clearly described his proposals as not profit sharing? He described his proposals as a basic wage plus a supplement that would vary according to profits. But he made it quite clear that this was not a scheme in which profits themselves would be used for that supplement.

§ Lord Young of Graffham
My Lords, the noble Lord, Lord Hatch of Lusby, has described a classic profit sharing arrangement in which workers share, in addition to their wage, a formula based upon the amount of the profits. It is not in that sense an actual share in the profits. It is an accretion to them. I fail to see the distinction. I think the noble Lord is wrong in saying that I have misled the House. I also think he is wrong in persisting with this point.