Tuesday, 6 November 2012

We must resist back-door Beecroft

I am grateful to Gareth Epps for this analysis:

George Osborne is proposing to give rights to employees in companies to have shares, in return for reduced employment rights. This proposal has caused considerable concern among Liberal Democrats, especially as we have only last month at our Autumn Conference brought forward serious and detailed proposals on Mutuals, Employee Ownership and Workplace Democracy. While our plans enjoy wider backing in the tradition of Liberal co-ownership proposals dating back to the Jo Grimond era, Osborne’s rushed plans (announced barely a fortnight ago) do not.

Osborne’s proposals seem to be an attempt to bring back the discredited Beecroft proposals by the back door: proposals which had no support in the world of business, or anywhere else for that matter. He has managed the feat of uniting the CBI, TUC and the Chartered Institute of Personnel &
Development (CIPD) in opposition. A recent YouGov poll showed that Conservatives are more likely (by 46 to 37 per cent) to be against the proposals than for them. The body representing employee-owned business, the Employee Owners’ Association, says (see http://www.employeeownership.co.uk/news/press/bis-consult-3/http://www.employeeownership.co.uk/news/press/bis-consult-3/) that the proposals are completely unnecessary: that ‘there is no need to dilute the rights of workers in order to grow employee ownership and no data to suggest that doing so would significantly boost the number of employee owners. Indeed all of the evidence is that employee ownership in the UK is growing and the businesses concerned thriving, because they enhance not dilute the working conditions and entitlements of employee owners.’

Apart from George Osborne and a handful of Tories, there is no support for these unworkable proposals, much less a body of evidence in support. Indeed, it is only evidence that will consign them to their rightful fate.

There are a number of flaws to the proposals as they currently stand, including:
  • The concern that an unemployed person may be compelled to enter a job without rights or face losing their JSA.
  • The tax break proposed by Osbourne would appear to be of greatest benefit to financial services firms in the City - a blank cheque to bankers.
  • The tax break takes no account of the over 100,000 existing employee owners in the UK, all of whom have full employment rights.
  • Just like Beecroft, many of the proposals will not do anything to allow entrepreneurial businesses to grow better.

Ten years ago, I was working for what was one of the fastest-growing companies in the UK. It ruthlessly used legal procedures to incentivise its workforce, while removing employees not felt to be doing enough, or re-employing them as consultants. That can be lawfully done - why do more now? Well, as Lucy Bone in Huffington Post puts it: ‘It is high-earners who could profit most from the Employee/Owner scheme.

They will see the opportunity to make their remuneration package as tax efficient as possible. The proposal has most obvious synergy for City workers, whose high salaries disincentivise them from bringing unfair dismissal claims and who are paid large bonuses, often in shares. These employees will be paying higher rates of income tax and CGT, and so have much to gain from today's proposal. Ironic, perhaps, that a proposal to help small business may in fact bring benefits to that most unloved of employees: the banker.’

The consultation site is still open for a couple of days (note that it was launched not long ago, giving less notice than the govenment's own rules, which state that consultation to changes in
the law is supposed to last for 12 weeks.) It can be accessed via the Internet at:
You can respond directly to the consultation at

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