Workers set to be offered shares for rights

In his keynote address at the Conservative Party conference yesterday, the Chancellor said his voluntary employee-ownership scheme would form part of an “enterprise strategy” needed to save the UK from “sinking” in the face of competition from emerging economies in the globalised world.

The move was immediately welcomed by senior business figures including venture capitalist Adrian Beecroft – author of a controversial review of employment law – as “a real shot in the arm for Britain’s entrepreneurs”.

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”.

But unions condemned the proposal, which will see employees give up their rights to statutory redundancy pay and protection from unfair dismissal as well as the ability to request flexible working, in return for between £2,000 and £50,000-worth of shares, which would be exempt from capital gains tax when sold.

GMB boss Paul Kenny said that slashing rights “won’t create jobs and won’t create growth”, while TUC general secretary Brendan Barber said that few firms would choose to “tie themselves up in the tangle of red tape necessary to trigger these exemptions”.

The Treasury said it aims to fast-track the scheme through Parliament for introduction in April, and expects hundreds of thousands of employees to sign up within the next few years, at a cost of around £100m annually in lost capital gains tax payments.

Meanwhile, the scene was set for an autumn of wrangling over cuts within the coalition Government, as Mr Osborne confirmed his intention to slice a further £10 billion from welfare by 2016-17, on top of the £18bn already announced.

However, Liberal Democrat Deputy Prime Minister Nick Clegg said the Chancellor was merely setting out the Conservative stall for a negotiation over the months to come.

“Nothing in detail has been agreed on further cuts or savings to welfare,” Mr Clegg said. “You need to have a combination of... asking people at the top to make a greater contribution and also the contribution from public spending cuts.

“Exactly how you strike the balance between the two is exactly the kind of thing that the Conservatives and the Liberal Democrats will be thrashing out within 
Government in the months ahead.”

Speaking against the backdrop of reports that the Office for Budget Responsibility expects austerity to stretch into 2018, Mr Osborne insisted that “the economy is healing”.

But he admitted that the process of eliminating the deficit was “taking longer than we hoped, because the damage was greater than we feared”. He promised delegates: “We will press on and we shall overcome... We will finish the job we have started.”

With £16bn of additional savings needed in 2015-16, Mr Osborne said he would stick to his policy of finding 80 per cent from spending reductions and 20 per cent 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 ruled out the Lib Dems’ favoured “mansion tax” on expensive properties, and 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.”

No precise details were released of how the Chancellor hopes to find the necessary £10bn in welfare cuts.

But he indicated that he was considering holding benefit rises below the rate of wage inflation; cutting housing benefit for under-25s; and restricting support for unemployed parents with multiple children.

He painted a grim picture of the future for the West which faces being “out-worked, out-competed and out-smarted” by emerging economic powers unless it makes fundamental changes to its welfare, education and tax systems.