date: 30 August 2013
embargo: 00.01hrs Sunday 1 September 2013
The government's shares for rights scheme, which takes effect from today (Sunday), will strip staff of basic employment rights and could cost taxpayers £1bn, the TUC warns.
The 'employee ownership' scheme, first announced by the Chancellor in his 2012 Conservative Party conference speech, allows individuals to trade key employment rights for shares in a company.
Employee owners lose their protection from unfair dismissal and rights to redundancy pay and flexible working, making it easier and cheaper to be sacked. In exchange, they receive tax-free shares valued at between £2,000 and £50,000 - though they are not guaranteed equal voting rights or dividends like other shareholders.
There is no guarantee that the shares would gain or even hold their value, so some individuals could end up trading basic employment rights for worthless shares, warns the TUC.
The government originally put the cost of the scheme at up to £80m a year by 2017/18. However, it has since emerged that the scheme could be exploited as a tax loophole. For example, the scheme could allow people who already receive shares as part of their pay package to avoid paying any tax when they sell them, or could allow company founders/directors to classify themselves as 'employee owners' so as to avoid paying capital gains tax.
In their assessment of the government's proposals, the Office for Budget Responsibility estimated that the scheme could cost up to £1bn, largely as a result of tax avoidance. The Chancellor has since announced in his 2013 Budget that the first £2,000 of shares given to workers who become 'employee shareholders' will be exempt from both national insurance and income tax. This measure is forecast to cost the public purse another £200 million over the next five years.
The shares for rights proposals have received widespread opposition, including from employer organisations such as the Chartered Institute of Personnel and Development (CIPD). When the government belatedly consulted on the proposals earlier this year, 397 respondents opposed them, with just 3 in support.
The TUC believes the scheme will be used by wealthy executives to dodge their fair share of tax. Furthermore, as 'employee ownership' can be a requirement for new staff, the TUC fears that ordinary workers could be forced to give away basic employment rights in exchange for worthless shares.
The Chancellor's shares for rights scheme is another attempt to squeeze the living standards of workers, whilst allowing the super-rich to dodge paying their fair share of tax, says the TUC.
TUC General Secretary Frances O'Grady said: 'The Chancellor's shares for rights gimmick may have cheered delegates at the Conservative Party conference but it could end up costing taxpayers hundreds of millions of pounds.
'At best the scheme will be completely ignored and consigned to Parliament's pointless policies hall of shame.
'But it could turn into a gaping new £1bn tax loophole, allowing the super rich to dodge paying tax on company shares. At a time when the public finances are under strain, the government should be closing these loopholes not creating new ones.
'Ordinary workers who may be forced to become employee owners in order to find work could end up giving up basic rights such as redundancy pay for worthless company shares. Although this is an employment scam worthy of a Watchdog investigation, it has been created and encouraged by the Chancellor.'
NOTES TO EDITORS:
- Further information about the OBR costings is available at the following TUC touchstone blog http://bit.ly/15AJn1p
- The TUC's Campaign Plan can be downloaded from www.tuc.org.uk/campaignplan
- All TUC press releases can be found at www.tuc.org.uk
- Congress 2013 will be held at the Bournemouth International Centre from Sunday 8 September to Wednesday 11 September. The deadline for free media passes for Congress 2013 was Wednesday 28 August. Credentials can still be applied for by completing the online form www.tuc.org.uk/media_credentials but will now be processed in Bournemouth and will cost £75 each.
- Follow the TUC on Twitter: @tucnews
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: firstname.lastname@example.org
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: email@example.com
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