Discretionary Share Option Schemes in the Privatised Utilities

Part of New clause 1 – in the House of Commons at 5:30 pm on 3rd April 1995.

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Photo of Mrs Helen Liddell Mrs Helen Liddell , Monklands East 5:30 pm, 3rd April 1995

I am sure that the hon. Gentleman is aware that there are different kinds of share option schemes. The 36,000 ordinary employees of British Gas usually benefit from savings-related share schemes and tend to be less able to have an impact on the share price than the senior executives who can directly affect it.

The hon. Member for Beaconsfield (Mr. Smith) mentioned the impact that institutional shareholders can have on controlling the excesses of senior management. That was a preposterous suggestion. Part of the argument of Mr. Ross Goobey has been that institutional shareholders are limited in their ability to control the senior management of companies. There is an informal network that operates among institutional shareholders. They are the same people, usually male and usually from the same schools, and they are recycled time and again. They turn up at the same annual meetings, eat the same prawn cocktails and have the same impact on the share remuneration schemes because they benefit from share remuneration schemes.

I hope that the Financial Secretary will make it clear how it is equitable that the taxation system that applies to the sale of share options should be different from that which applies to other aspects of earned income. That is extremely difficult to explain to members of the public who, like my constituents, see their service from British Gas reduced by the closure of gas showrooms. There are fears about what will happen to assistance for disabled people from the gas industry.

It is difficult to explain to people why senior executives in the gas industry can choose when to activate their options and can phase in the activation of their options over time to take advantage of allowances that are available through capital gains tax. They can even pass on those share options to their spouse to allow their wife or husband to benefit from those share options and from the capital allowances that are available to them.

That is manifestly unfair and people are not that gullible. They see that the rich are getting richer on the backs of the rest of us. The privatised utilities have been seen as basic to the structure of our country. They mainly operate as monopolies or quasi-monopolies. Those who are or have been in a position to benefit from the first tranches of share options—and they were granted options at a rate that was greatly deflated and had been massively underestimated—can now become millionaires, in some cases millionaires many times over.

The new clause seeks only a rational report and analysis of what is happening and of the impact on the Exchequer of the proposals so that people can make genuine judgments. It was not so very long ago that we were told by the Prime Minister of his commitment to ending inequality. The most fundamental inequality is this system of share options, which is unfair and inefficient. No one can put hand on heart and prove that the existence of share options dramatically improves, or in any way affects, the performance of a company or of an executive. Research published at the weekend suggested that the schemes have a limited impact on improving company performance.

The Financial Secretary has the opportunity to instigate an examination into the operation of such schemes and their impact on the economy and to consider the structure of the tax system in such a way as to get rid of the inequalities and convince the people that the Government are not prepared just to govern in the interests of the few at the expense of the many.