Share ownership for employees should be a Tory flagship policy

More people are in work in Britain than at any time since records began, the latest statistics published this week by the ONS revealed. Put another way, the unemployment rate today of 3.9% is at its lowest level since 1975.

After years of stagnating, wages are now outstripping inflation and in the last three months average wages rose by 3.4% to an 11-year high. It’s true that many of these jobs are part-time. Some are on “zero-hours” contracts and are therefore unpredictable and low-paid, but the point is that employment is growing and so is confidence.

This is all fantastic news, and we should celebrate the positive signs. What is not growing, and remains stubbornly low, is the UK’s productivity rate.

Yet this is the figure we should be looking at because it means that over the long-term living standards are not going to rise much further than the present small increases.

Which is why the UK government’s persistent resistance to looking at alternative ways of improving productivity is so ridiculously short-term, if not backward. Stian Westlake,  author of Capitalism Without Capital: the Rise of the Intangible Economy and a former adviser to three science ministers, put it more bluntly when he wrote in a damning essay this week that the Conservatives have run out of economic ideas.

It’s a theme we here at Reaction have been banging on about for months. But Westlake has form and should be listened to closely. His killer point is that because of the Conservative party’s obsession with Brexit, the government is finding it difficult to claim to be economically competent, even though, paradoxically, the economy is doing well.

I would go further than Westlake. It’s not just that the Tories have run out of ideas. They seem barely interested.

Take the issue of wider share ownership and employee owned businesses, one of the most effective ways of improving the productivity of any business. The Tories are missing a trick.

Having a stake transforms businesses, for everyone involved. All the vital statistics from the Employee Ownership Association shows that productivity improves, profits rise and, guess what, happiness levels go up too and staff stay working longer when staff own shares in their own business. Employee owned businesses also invest more in research and development and for the long-term.

You might even go as far to say that you can’t be more small c conservative than wanting to encourage workers to own a small part of their own business; that this is capitalism in the raw rather than the corporatist institutional ownership by pension funds of most of the UK’s companies.

So what have the Tories done about encouraging companies to transfer shares to their workers, or for workers to take up a share of ownership? Nada, precisely nothing.

In fact, you have to go back to David Cameron’s coalition government to see any form of encouragement through tax breaks, and that impetus came from the LibDems.

What’s worse, though, is that the situation is deteriorating. Rather than launching their own ideas, government ministers have been scurrying about asking business leaders, trade bodies and policy makers what they think of Labour’s recent policy initiatives on wider share ownership known as the “Inclusive Ownership Fund” and “Right to Own” which proposes employee share ownership as a solution to business failures.

As I’ve written before, Labour’s policies which recommend companies giving over 10% of shares to its workforce are unworkable, probably illegal and in reality would prove to be a stealth tax on private and public companies.

Instead of screaming that Labour’s policies are theft by another name, the Tories are asking the industry what they think of them. You can’t get more feeble than that. Or have the Tories totally lost confidence in themselves?

Even Deb Oxley, chief executive of the EOA, which represents  companies such as John Lewis, Make and more recently, Aardman, the makers of Wallace & Gromit, is tearing out her hair. As Oxley asks, why is the great and proven concept of wider ownership being turned into a political football?

More pertinently, why have Conservative government ministers been so pathetic as to ask what others think of Labour’s plans. Don’t they have their own thoughts ? Why are they allowing the debate to be so old-school, to be one of bosses versus workers?  Or have they, as Westlake suggests, simply run out of steam?

That would be disastrous but it seems to be the most obvious reason. Brexit fatigue has caused a collapse in confidence. They can’t put forward even the most sensible and interesting proposals for reform because they don’t have them or can’t be bothered.

Even President Trump’s administration, for all its faults, pushed through the Main Street Employee Ownership Act last year, which encourages companies to open up ownership to their employees.

It came about because Senator Kirsten Gillibrand of New York managed to tack her amendment onto one of Trump’s defence policies. Her work was based on the findings of Rutgers Professor Joseph Blasi, who had been advocating for years that greater employee ownership was a way to level the economic playing field but also to help small businesses when their owners die or move on. Blasi got little traction from either the Democrats or the Republicans until Gillibrand got hold of the idea, and pushed it through on a bipartisan basis.

Her plan is attractive: it doesn’t cost anything, Rather, it’s being promoted with “nudge” tactics as the Small Business Administration is making loan guarantee programs more available to employee stock ownership plans and worker-owned cooperatives. This has made a big difference as traditionally such businesses have had difficulties with raising capital from the mainstream banks.

It’s being taken up as a big deal in the US, particularly as so many baby-boomers who in 2012  owned nearly half of the privately-held businesses in America, are now retiring. The great fear is that many of those businesses will either collapse if the owners can’t find a buyer or a family member to take over. The UK faces the same problem over succession planning, with many third generation family businesses either being bought out by bigger companies or disappearing, often because of the tax complications involved with inheritance.

How ironic if Trump turns out to be the champion of the workers.

Maggie Pagano,
Executive Editor,
Reaction