Clause 91 - Enterprise management incentives: subsidiaries

Finance Bill – in a Public Bill Committee at 3:00 pm on 20th May 2004.

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Question proposed, That the clause stand part of the Bill.

Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary To the Treasury, Economic Affairs, Shadow Chief Secretary to the Treasury

Again, our understanding is that the clause amends a technical rule in relation to the definition of a qualifying subsidiary for the purposes of enterprise management incentives. Previously, to be a qualifying company all subsidiaries were required to be 75 per cent. subsidiaries; that requirement is now relaxed to 51 per cent., and there are new tests if the subsidiary is a property management subsidiary, in which case it will be required to be a 90 per cent. subsidiary. During the course of many—I forget how many—Finance Bills, we have consistently made the point that EMIs need to be widened, and we are glad to note that since they were introduced the Government have widened them. The clause is another sensible bit of widening, which we welcome.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

I welcome you to the Chair, Sir John.

What assessment has been made of the extent to which the arrangement is used? I understand from the background note that it was introduced in the Finance Act 2000. What is the Treasury's view of how successful it has been since?

Photo of John Healey John Healey The Economic Secretary to the Treasury

The hon. Member for Arundel and South Downs is right that in a sense the clause makes technical changes to the qualifying rules for EMIs, but that underplays the fact that we are making the changes in response to representations that we have received to do just that, and that the changes are likely to make EMIs much more useful and attractive.

To answer the hon. Member for North Norfolk (Norman Lamb): when we introduced EMIs, we estimated that they would be taken up over the first three years by perhaps 2,500 companies; in fact, about 4,500 companies have taken them up and in total more than 70,000 EMI options have been granted. That gives the Committee an indication of how the success of the scheme has outstripped our expectations and how the reforms that we propose in the clause will reinforce it for the future.

Question put and agreed to.

Clause 91 ordered to stand part of the Bill.

Clauses 92 and 93 ordered to stand part of the Bill.