Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 10 June 1974.

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Photo of Mr Peter Rees Mr Peter Rees , Dover and Deal 12:00, 10 June 1974

I have been privileged to take part in debates in Committee on the tax system dealing with share option schemes and share incentive schemes since 1972. The case against them has almost uniformly been put by the hon. Member who now occupies the position of Financial Secretary to the Treasury. It has been noticeable that there have been few other contributions from the Labour benches. It has struck me, as I have listened to the hon. Gentleman, that there is an unbridgeable gulf of incomprehension between these two parts of the Committee.

The hon. Gentleman has always put the case against share option and share incentive schemes on two grounds. The first is that if all cannot participate, none should. In conformity with the spirit of the great resolution we passed before the recess, I must declare a lack of interest in that I am a professional man and do not, and am unlikely to, benefit from a share option or share incentive scheme. None the less I am entirely in favour of them and I cannot follow the rather mean and squalid approach of the hon. Gentleman.

Secondly, the hon. Gentleman has made the point on previous occasions and tonight that there is no case for putting employees who may benefit from a share option or share incentive scheme into a privileged position. If he and the Committee will allow me to say so, it is at this point that I often wonder whether he has truly grasped the brief which no doubt the devoted gentlemen in the Official Box have placed into his eager hands before the debate.

I hope the Committee will forgive me if I go into a little detail on this point. I know that my hon. Friends grasp the point and that it is entirely clear to them. But the hon. Gentleman who holds this highly important office concerned with our tax affairs seems to be unaware of what, on a previous occasion, his right hon. Friend the Member for Cardiff, Soulh-East (Mr. Callaghan) did to these schemes. The truth is that before the Finance Act 1967 an employee who was privileged to participate was taxed when he was granted his option on the value of the option at that point of time. But he paid no tax when he exercised his option even though, as one would expect, the shares had gone up. That would strike me, and, I hope, my hon. Friends, as perfectly fair, because, although he may have contributed to the rise in the value of the shares that rise in value did not constitute, in any true sense, remuneration for his services.

What the hon. Gentleman's right hon. Friend did, and what he is attempting to do now, was to ensure that an employee would not be taxed when he participated in the scheme but would pay capital gains tax and income tax at the basic and higher rate on the difference between the value of the shares at the date he was granted the option and the value of the shares at the date he exercised his option —an entirely penal provision.

It puts him in a far worse position than an employee who might, at least prior to this Finance Bill, have borrowed money and invested it in his own company. The combination of these two measures makes it virtually certain that an employee without any capital resources will be unable to acquire a stake in the company for which he works. One asks oneself: why is it that hon. and right hon. Gentlemen opposite have this obsessive concern with share option and share incentive schemes? Are they totally opposed to any form of capitalism, any form of capital stake acquired by employees? Are they afraid that employees might become too closely identified with the fortunes of the companies for which they work? Do they in their heart of hearts want to see all employees become the employees of nationalised industry? Is the shadow of that earnest, eloquent Marxist the right hon. Member for Bristol, South-East (Mr. Benn) to be cast over these debates, too? Or are hon. and right hon. Gentlemen opposite frightened that if employees become too closely identified with the capital structure and fortunes of the companies for which they work the influence of the trade unions in them may be undermined?

10.30 p.m.

I was not over-enamoured of the measures introduced in 1972 and 1973. The rules were too complex and too strictly drawn, and more generosity could be injected into them. But they were a modest start. That modest start is to be swept away. I am sure that the Committee and the country will have noticed the arrogant reply of the Financial Secretary to an intervention of mine when I pointed out that many companies have invested considerable amounts of money and thought in starting these schemes, and now they are to be entirely stultified by the ill-thought-out, obsessional measure we are debating.

I hope that my right hon. and hon. Friends and members of the Liberal Party will agree that this clause is based on petty doctrinal spite, and I hope that the country, and particularly employees of companies which have had the forethought to introduce schemes in the past two or three years, will notice it. I shall vote against the clause with absolute enthusiasm.