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Taxpayer risks losing 1billion under Osborne plan to bribe workers into giving up their rights
Employees urged to sacrifice rights in return for shares in their firmChancellor offered tax break on profits to encourage take upOffice for Budget Responsibility says it could cost 1billion by 2017-18Institute for Fiscal Studies condemns 'lollipop' at a time when ministers condemning other tax avoidance
16:07 GMT, 11 December 2012
Giving workers shares in their companies in return for losing some employee rights could cost 1billion, it emerged today.
Osborne has been warned his ‘shares for workers rights’ plan will leave
a big hole in Treasury coffers at a time when other parts of government
are clamping down on tax avoidance.
Critics accused the Chancellor of putting ‘another billion pound lollipop on the table’ which could be used as a tax dodge.
Chancellor George Osborne, who joined children to paint a money box at a Christmas party at Number 11 Downing Street, has been warned his 'shares for rights' plan will cost 1billion
Today Mr Osborne was hosting his annual Christmas party in Number 11 Downing Street for children's charity, Starlight.
Earlier the Office for Budget Responsibility
raised concerns about a ‘number of uncertainties’ surrounding the plan
to give staff a tax break on profits they make on shares awarded under
The idea is
already deeply controversial in government, seen as a spin-off from a
plan by venture capitalist and Tory donor Adrian Beecroft to slash
employee rights to encourage firms to hire more staff.
Announcing the policy in his conference speech, Mr Osborne said it was a ‘voluntary three-way deal’.
Chancellor George Osborne announced his 'voluntary three-way deal' for employees in his party conference speech in October
‘You the company: give your employees shares in the business. You the employee: replace your old rights of unfair dismissal and redundancy with new rights of ownership. And what will the government do
‘We'll charge no capital gains tax at all on the profit you make on your shares …Owners, workers and the taxman, all in it together.’
But in documents published by the OBR, it has emerged that desk break could cost the taxpayer 1billion by 2017-18.
‘First, it is difficult to estimate how quickly the relief will be taken up; this could make a significant difference as the cost is expected to rise towards 1 billion beyond the end of the forecast horizon, OBR costing documents state.
‘Second, it is hard to predict how quickly the increased scope for tax planning will be exploited; again this could be quantitatively significant as a quarter of the costing already arises from tax planning.’
Paul Johnson, director of the Institute for Fiscal Studies, said the policy of not charging capital gains tax on the shares was at odds with the purported crackdown on tax avoidance, which has seen multinational firms like Starbucks, Amazon and Google in the headlines.
‘Just as it is berating those who have picked up the tax sweeties currently lying around, it is preparing to put another billion-pound lollipop on the table,’ Mr Johnson wrote in the Financial Times today.
‘There may be a case for more flexible approaches to employment legislation. But as a tax policy, “shares for rights” always looked pretty questionable. At a time of increasing scrutiny of tax avoidance schemes, it has all the hallmarks of another avoidance opportunity.’
Under the plans, employees will be given the choice of a traditional contract or one that does not afford them the usual employment rights.
The alternative 'owner-employee' contract will not give the employee rights on unfair dismissal, redundancy, the right to request flexible working and time off for training.
Mothers will be required to provide 16 weeks’ notice of a firm date of return from maternity leave, instead of the usual eight, in return for shares in their company.
Last week the results of a consultation on the policy showed that from 209 responses only a ‘very small number’ thought it was a good idea.