Government unveils ‘rights for shares’ scheme

The new “employee-owners” will receive between £2,000 and £50,000 of shares that will be exempt from capital gains tax when sold, and in return will give up rights on unfair dismissal, redundancy and the right to request flexible working and time off for training.

Announcing the policy to the Conservative annual conference in Birmingham, Mr Osborne said it would appeal to new businesses starting up and small and medium-sized firms who need flexible labour and highly motivated staff.

But aides said the voluntary scheme will be open to any limited company. They expect hundreds of thousands of employees to sign up within the next few years, at a cost to the Treasury of around £100 million in lost capital gains tax by 2017/18, and growing in subsequent years.

Mr Osborne’s aides said that the plan had been agreed with Liberal Democrats, including Business Secretary Vince Cable and is expected to be fast-tracked through Parliament this autumn for introduction in April 2013.

But it is likely to provoke clashes with unions, though TUC general secretary Brendan Barber suggested that take-up was likely to be small.

Mr Barber said: “We deplore any attack on maternity provision or protection against unfair dismissal, but these complex proposals do not look as if they will have very much impact as few small businesses will want to tie themselves up in the tangle of red tape necessary to trigger these exemptions.”

Entrepreneur Adrian Beecroft, who called for employment rights to be scaled back in a controversial report for Prime Minister David Cameron, hailed Mr Osborne’s plan as “creative and exciting” and said it could help deliver the motivated and flexible workforce that growing businesses need.

And Simon Walker, director-general of the Institute of Directors, said it had “the potential to reduce the employment law burden on companies and make employees better off at the same time”.

Mr Osborne also announced plans to change the tax regime for shale gas, in order to encourage research and development in the new power source, which some believe has the potential to provide a growing proportion of the UK’s energy needs from reserves in Lancashire and around the country.

Ministers will consult on more generous arrangements for firms investing in shale gas - currently taxed under the same regime as North Sea oil - to recognise the uncertainty surrounding the future of the industry and its possible potential to generate both jobs and cheap energy.

As expected, Mr Osborne used his speech to declare his intention to press ahead with £10 billion in welfare cuts by 2016/17, while ruling out the “mansion tax” on expensive properties favoured by the Lib Dems.

Speaking as the Financial Times reported that the Office for Budget Responsibility expects austerity to stretch into 2018 because of sluggish growth, Mr Osborne admitted that the recovery from recession is “taking longer than we hoped, because the damage was greater than we feared”.

But he insisted: “We will finish the job we have started.”

With £16 billion of additional savings needed to keep on track for his target to eliminate Britain’s national deficit within five years, Mr Osborne said he would stick to the policy of finding 80% of the savings from reductions in spending and 20% from increased revenues, including tax.

The rich will be required to make a contribution to deficit reduction through the “ruthless pursuit of tax evasion”, he said.

But he added: “Just as we should never balance the budget on the backs of the poor, so it’s an economic delusion to think you can balance it only on the wallets of the rich.

“It is wrong that it’s possible for someone to be better off on benefits than they would be in work.”

Among those likely to lose out from the £10 billion welfare cuts are under-25s, who look set to be stripped of housing benefit, and unemployed parents, who may face reductions in the amounts of support they get for additional children.

But Deputy Prime Minister Nick Clegg signalled that Tories will face resistance from Liberal Democrats within Government to the welfare cuts.

“Nothing in detail has been agreed on cuts to welfare,” Mr Clegg told the BBC. “The Conservatives are, of course, perfectly entitled to set out their stall about what we do as a country as we have to tighten our belts further, as we indeed were at our party conference.

“My attitude has always been very simple, very straightforward, which is that as we have to make more savings as a country, as we do, you must start at the (top) and work your way down.

“You need to have a combination... of asking the people at the top to make a greater contribution and also a contribution from public spending cuts, but where they fall and exactly how you strike the balance between the two is exactly the kind of thing the Conservatives and Liberal Democrats will be thrashing out in the months ahead.”

Shadow chief secretary to the Treasury Rachel Reeves said Mr Osborne’s speech showed he was “in complete denial about the failure of his plan”.

“His defensive speech didn’t once mention that his policies have seen a double-dip recession, one million young people out of work and, as a result, the deficit going up by 22% so far this year,” said Ms Reeves. “And he failed to set out any policies to deliver the jobs and growth we need to get the deficit down.”