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Employee ownership and employee shareholder status – reasons to be cheerful, part 2

I continue to take a positive approach to employee shareholder status and believe the measure has some incidental benefits for employee ownership (as defined in the Nuttall Review), as explained I continue to take a positive approach to employee shareholder status and believe the measure has some incidental benefits for employee ownership (as defined in the Nuttall Review), as explained in Employee ownership and employee shareholder status – reasons to be cheerful?. In particular, the employee shareholder status controversy has helped attract much needed attention towards employee ownership, and so raise awareness of employee ownership.

There have been two recent conflicting developments.

As Mark Gearing reported on Budget Day, the Chancellor confirmed that the first £2,000 worth of shares received in exchange for employee shareholder status will be free of income tax and NICs (Employee shareholders get further tax break).

But later that day the employee shareholder status clause (clause 27 in the Growth and Infrastructure Bill) was debated in the House of Lords. At 5.34pm Lord Pannick asked "Since the Government ha[s] declined to listen, it is time for noble Lords to put Clause 27 out of its misery. I wish to test the opinion of the House...". This resulted in a successful motion to remove clause 27.  The Employee Ownership Association immediately welcomed the Lords defeat of the "rights for shares" proposal.

Whether or not employee shareholder status is eventually enacted, it is helpful that its introduction is deferred until Autumn 2013. This gives a few months to focus on implementation of the Nuttall Review's recommendations on employee ownership, hopefully free from the continuing confusion between employee ownership and employee shareholder status. In the House of Lords debate, Lord Adonis made the distinction clear: "I have emphasised that we on this side strongly support wider [employee ownership], and we backed proposals to that effect in the Nuttall report published only eight months ago. However, that is entirely different from trading shares for basic rights..." Some commentators manage the distinction well - see for example Employee owners to receive CGT relief  but most struggle.

The Deputy Prime Minister Nick Clegg delivered the Robert Oakeshott Memorial Lecture on 27 March 2013. He took the opportunity to outline the progress the Government has made on employee ownership since the Nuttall Review was published in July 2012. The speech also provided an opportunity for a question on employee shareholder status. In reply, Nick Clegg, as reported in the Press, said:

""I think the shares for rights thing is a very niche measure which I guess would only be taken up by start ups or entrepreneurs. There is a debate going on in Parliament and we have made a commitment to see that delivered. It was part of a package thrashed out in the coalition Government alongside the business bank."

He emphasised that employee shareholder status "should be seen as very separate both in terms of content but also in terms of scale [from employee ownership]".

This clear explanation from the Deputy Prime Minister will hopefully help ensure that all further debate makes a clear distinction between employee shareholder status and the Government's vision for employee ownership in the UK.

 

 

 

 

 

 

 

 

 

 

 

 

 

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