Employee Share Ownership (Reform)

“Among the poorest half of people aged 25 to 34, typical net financial wealth among those who are not employee shareholders was just £77. But among employee shareholders, wealth stood at £750.”

That being the case, the five-year minimum investment commitment for SIP schemes, to ensure maximum tax efficiency, is no longer realistic.

The fact that the Government offer tax advantages to employee share ownership is, of course, welcome. The risk, however, is that without updating them, they could become increasingly obsolete. For that reason, the Bill would reduce the commitment from five years to three, to achieve maximum tax efficiency, as advocated by ProShare, the industry representative body. Moreover, many employers believe that such a change would make them more likely to offer SIP schemes.

Another problem is that current plans apply only to those on pay-as-you-earn. There are now, however, some 4 million people who work in the so-called gig economy. A further provision in the Bill would create a new plan that does not depend on regular monthly contributions and is accessible to those in less regular forms of work. It would enable employers to give a free share award to their employees, to be held for a year, after which it could be realised at a discount value, as in SAYE schemes currently. That would be attractive to younger staff, who may not envisage staying at a company for three years, let alone five.

The other provision in the Bill is to require the Treasury to carry out a consultation with all the relevant bodies, including those I have referred to, with the aim of modernising employee share ownership to reflect the changes that have taken place since the existing schemes were introduced. One new idea that could be consulted on is allowing employees to access the holding built up in their share incentive plan in a tax-efficient and advantageous manner that, under the current scheme, is only available after five years, with regular contributions made over the last one year, without a penalty being applied.

Before concluding, I would like to say a few words about the benefits that such schemes bring to employees and employers. Two examples illustrate the benefits to employees. First, Pets at Home staff—mainly shop floor staff working in retail—who participated in the company’s SAYE scheme have made an average gain of £21,000. That is a healthy return on their investment and an increase in their financial resilience. Secondly, as ProShare’s annual survey shows, the average value of a participant’s shareholding at the end of 2021 was £10,295—again, a significant sum.

Employers gain too. As the CBI and the Social Market Foundation pointed out, employees having a stake in the company they work for provides important productivity gains, as well as boosting innovation and corporate long-termism. I hope this Bill will be a good starting point in encouraging and expanding employee share ownership and enabling the potential benefits to all concerned to be realised.

That Sir George Howarth, Margaret Beckett, Kirsty Blackman, Sir Graham Brady, Philip Davies, Mr Jonathan Djanogly, Dame Margaret Hodge, John McDonnell, Esther McVey, Sarah Olney, Jim Shannon and Gareth Thomas present the Bill.

Sir George Howarth accordingly presented the Bill.