Employees will be asked to give up protections including some maternity rights under chancellor’s deregulation plans
A new breed of company in which workers will be forced to lose some maternity rights and all access to unfair dismissal tribunals has been unveiled by George Osborne as he tried to introduce a big deregulation of the labour market through the back door.
Osborne revealed that workers would be given shares by their employer worth between £2,000 and £50,000 and any gains in those shares would be exempt from capital gains tax.
In return they would be asked to give up their rights over unfair dismissal, redundancy and the right to request flexible working and time off for training. They would also be required to provide twice as much notice of a firm date of return from maternity leave – 16 weeks instead of eight.
Osborne told the Conservative party conference in Birmingham that the new “employer-owner” status would be optional for existing employees but existing companies and new startups could choose to offer only this new type of contract for new hires, making it a compulsory condition of employment.
Fast-track legislation will be introduced so firms can use the new type of contract from April 2013.
Osborne made the announcement in a speech promising he would not buckle or give up in the face of economic storms.
The employee-ownership scheme, endorsed by the Liberal Democrats according to Treasury sources, will be seen as a rebranding and adjustment of previous proposals for compulsory no-fault dismissal laid out by the venture capitalist Adrian Beecroft in a report to Downing Street.
The business secretary, Vince Cable, rejected the original Beecroft proposals, saying he was opposed to a hire-and-fire culture.
Critics fear the new scheme will mean that almost all new small firms will use this arrangement to circumvent labour market laws in return for giving the employee access to an initial £2,000 bonus.
The difficulty for Osborne is that not many new startups issue shares and few will have proven records of profits.
Osborne told the conference: “Workers: replace your old rights of unfair dismissal and redundancy with new rights of ownership. And what will the government do? We will charge no capital gains tax at all on the profit you make on your shares. Zero percent capital gains tax for these new employee-owners. Get shares and become owners of the company you work for. Owners, workers and the taxman, all in it together. Workers of the world unite.”
Osborne recruited a raft of big names in business to back the plan including Beecroft himself.
He said: “This is a creative and exciting version of proposals I made in my report. Growing businesses need a motivated and flexible workforce if they are to succeed and this new employer-owner status has the potential to deliver exactly that.”
Stuart Rose, the former chief executive of Marks and Spencer, said: “This is a win-win for entrepreneurs and employers in small and medium-sized companies that need a flexible dedicated workforce focused on growth.”
Simon Walker, director general of the Institute of Directors, said: “There’s far too much regulation of employment in this country and what our members are crying out for is the opportunity to employ people and they are scared to employ people at the moment because there’s a perception that there is just too much regulation, it’s too difficult if it doesn’t work out.”
Despite evidence that he is missing his borrowing and debt targets, Osborne used his speech to insist he would not turn back on his economic plan, promising: “We will finish the job we have started.”
He also confirmed that he would be seeking an additional £10bn of welfare cuts from 2015-16, and added that 80% of the deficit reduction would be borne by spending cuts as opposed to tax rises. The March budget set out illustrative plans for £6bn welfare cuts in 2015-16 and £10bn the year afterwards, but Osborne would like to go faster and make the announcement in the autumn statement on 5 December.
Tory sources said senior Liberal Democrats had agreed these broad numbers, but none of the detail of how they would be achieved.
Osborne signalled that some of the cuts would come from holding down the level of benefits, asking: “How can we justify the incomes of those out of work rising faster than the incomes of those in work?” He asked: “Where is the fairness, we ask, for the shift worker leaving home in the dark hours of early morning who looks up at the closed blinds of their next door neighbour sleeping off a life on benefits?”
He also indicated cuts to child tax credits for families with more than three children and holding down the housing benefit budget by withdrawing benefits to those aged 25 or under. These cuts will produce little in savings, prompting the IPPR thinktank to suggest the bulk of savings will come from linking those non-pensioner benefits that are not already frozen to average earnings for 2013-14, rather than to the consumer price inflation.
He did not spell out details of tax rises planned after 2015-16, save to rule out a mansion tax or any temporary wealth tax.
He added he was not going to introduce a tax on people’s homes – a key pledge of the Liberal Democrats – saying: “It would be sold as a mansion tax but once the tax inspector had his foot in the door you would soon find most homes in the country labelled a mansion. It’s not a mansion tax. It’s a homes tax and this party of home ownership will have no truck with it.”
He said: “Just as we should never balance the budget on the backs of the poor so its an economic delusion to think you can balance it only on the wallets of the rich.”
The bulk of the speech was a highly political attempt to defend his overall economic strategy, claiming the economy was healing and no one could trust Labour with the economy again.
He said he would not repeat the mistake of Edward Heath who in 1972, “two years into office, was faced with economic problems and over-powerful unions and buckled and gave up”.
In his most dramatic warning he claimed: “It is not too much to say that the future prosperity of our country, the future of a free enterprise system under law, even the stability of Europe is in question in a way it has not been in my lifetime.”
He also sought to wrest back the mantle of “one nation” seized by Ed Miliband at the Labour conference. He said: “We are not going to get through this as a country if we set one group against one another, if we divide, denounce and demonise. We need an effort from each and every one. One nation working hard together. We are still all in this together.” He said he would look for more income from being tougher on tax evasion.
More broadly, he admitted his forecasts had been blown off course, saying: “The truth is the damage done by the debts and the banking crisis was worse than we feared. The rise in world oil prices has been larger than anyone forecast. And sadly the predictions that you made, I made, that almost everyone has made about the euro turned out to be true.”
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