Discretionary Share Option Schemes in the Privatised Utilities

Part of New clause 1 – in the House of Commons at 5:15 pm on 3rd April 1995.

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Photo of Andrew Smith Andrew Smith Shadow Chief Secretary to the Treasury, Shadow Spokesperson (Treasury) 5:15 pm, 3rd April 1995

I was just coming to the part of the new clause that deals with the effects on revenue, Mr. Deputy Speaker. Those effects are considerable. We also want executive share options to be taxed as income to discourage abuse.

It is high time that the Government listened to the public, and ended the indefensible position in which there is one rule for the few and another for the many. These discretionary share options are very expensive to the public purse: even the Government estimate that the cost to the taxpayer in the financial year that is now ending was some £60 million. That is a large amount, even if it is an underestimate—as we have argued it is, because it does not take account of all the opportunities for tax planning and avoidance.

Surely it is right to ask, as our new clause does, how such schemes affect the public purse and what public benefits they produce. I look forward to hearing from the Financial Secretary exactly what benefit the public are receiving in return for the huge handouts involved in the tax subsidies for those schemes.

It is not good enough for the Government to try to subcontract their responsibilities to the Grcenbury committee. Important though that body is, and important though it is that the views of the CBI are taken into account, it cannot stand in for the Government. Paul Foot, writing in The Guardian, provided an amusing insight—although I do not always agree with him politically. Musing on what might have happened if Labour had been in government, he attempted to draw a parallel: Imagine, for instance, that the trade union leaders, in a sudden rush of enthusiasm, pay themselves enormous wage increases. Imagine that Bill Morris or John Edmonds tripled their salaries. Imagine the sustained howl of protest in the newspapers.Investigative journalists Would suddenly flourish at the Daily Mail. The union leaders would be pursued by persistent hacks who would describe in detail every morsel of food they consumed at La Gavroche"— whatever that is— and every gold tap in their country mansions.Imagine, then, the Government being panicked into a response. Imagine the Lord Privy Seal. John Prescott, announcing that his government had decided to suspend all further action on the matter until a committee of trade unionists, previously set up by the TUC, made their recommendations. Imagine. What's more, that the TUC committee was headed by Bill Morris and John Edmonds.Can you conjure up the Daily Mail headline: BLAIR'S BACK-SCRATCHING BUDDIES. A portentous leader in the Daily Telegraph would condemn the Government for insulting Parliament. 'What has become a matter of urgent public interest—a matter which threatens the very integrity of our public life—is to he dealt with by a cabal led by the very brothers who stand accused of enriching themselves beyond the dreams of avarice.Strangely, there are few such headlines or leaders in the Mail or the Telegraph about the Greenbury committee", which, Mr. Foot suggests, comprises

a clutch of millionaires appointed by the Confederation of British Industry to investigate the scandal of, er, millionaires paying themselves grotesque salaries and share options. It is a humorous piece, but does it not underline the Government's hypocrisy? This is an issue of vital public interest; there is outrage up and down the land about what the Government are allowing to happen. The Government, however, are happy to propose simply subcontracting their responsibilities to a CBI committee some of whose members are beneficiaries of the very schemes that they are charged with investigating. That is unacceptable to the public, and it should be unacceptable to the House.