Railtrack 'shows risks of employee share schemes'

The collapse of Railtrack, which saw hundreds of rail workers with shares in the business lose thousands of pounds, will make employees cautious about signing up to company share schemes, businesses and unions said yesterday.

The warning, from the employers' group CBI and the Trades Union Congress, came as ministers launched a roadshow aimed at drumming up support for the Government's share incentive plan.

The Government announced in last year's Budget that both employers and workers could receive tax breaks for the granting or purchase of shares in their own company.

John Monks, the general secretary of the TUC, said there was "huge sympathy"' in the union movement for Railtrack employees, especially those who had lost a "tremendous" amount of money.

"Don't put all your eggs in one basket, is good advice," he said. "We would always advise people to be careful. It is important that people are judicious about investing too heavily in schemes."

Digby Jones, the director-general of the CBI, hailed the schemes as the "most tax-efficient vehicle produced by any chancellor of any political party". But he said Railtrack had been "educative" as it made people understand the "vagaries in which companies operate".

"Shares can go down as well as up and we will have to work to make sure they go in the right direction, and people should not think this is the equivalent of putting money in the building society," he said.

The Chancellor, Gordon Brown, who launched yesterday's initiative but left before he could answer questions, said share ownership was a key part of the Government's aim to improve productivity.

"Research has shown clearly the link between employee share ownership and increased productivity, and there is no better incentive for employees than for their work to be recognised and for them to share in their firm's success," Mr Brown said.

Under the scheme, companies can give employees up to £3,000-worth of free shares, and workers can buy up to £1,500 of shares out of pre-tax pay.