Everyone appears to be reporting Labour's plan to deliver a variation on a national wealth fund this morning. As Politics Home puts it:
The Shadow Chancellor will say companies with 250 or more staff would have to sign them up to an ‘Inclusive Ownership Fund' shareholding scheme.
Employees would receive dividend pay-outs at the end of the year worth up to £500, with any excess paid into a national pot that would go towards improving public services.
I feel much the same about this plan as I do about the plan to increase council tax on some second homes: it is a good start, but......
There are issues. First, wealth is linked to very particular employments by this plan. And since the plan is only applicable to those employed by larger U.K. companies, who already pay higher wages in average, income inequality may increase because of it.
Second, the scope is very limited and because it can be avoided by moving corporate domicile not really that wise. It disincentivises the UK and does not require foreign owned companies to partake.
Third, I am concerned that there is no plan for capital gains within these funds. What happens to them?
Fourth, this plan does not diversify employee's risk.
Fifth, should 10% of a company where only 3% of employees are in the UK be owned for the benefit of those employees? Is that fair? And a true reflection of international solidarity?
So, again, the sentiment is fine. The problem is in the execution.
What would I have done? I think one way to deal with this desire would have been to increase the tax rate on larger companies in the U.K. and require settlement in shares. This would only be on UK profits and maybe profits remitted to the UK. That would be reasonable. And since companies use profits to fund share buy backs this would be a wholly justifiable approach. The rate could be as much as 10% of profits. And half should go to a national wealth fund, automatically. The wealth should be shared.
My instinct is that this would create a considerably more equitable outcome, as well as generating considerable interest in what UK taxable profits might be, which would be no bad thing.
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“The Shadow Chancellor will say companies with 250 or more staff would have to sign them up to an ‘Inclusive Ownership Fund’ shareholding scheme……..
………Employees would receive dividend pay-outs at the end of the year worth up to £500,…. ”
Which particular cloud of ether did the daft-bugger pull that figure from ? How can he be so stupid as to put a cap on the benefits in such an arbitrary manner. Does he know nothing at all ?
And this is the UK’s best hope for a future government ….?
Saor Alba. Scotland needs to be out of this slow motion car crash.
What I hate about this is that it is assuming (once again) that the money in the economic system is all that there is and it just needs to be moved around to make it more equitable.
Yes – I know that the private sector is apparently drenched in money.
All McDonnell is doing is trying to dodge/squirm out of MMT.
We need more money in the economy and the right sort of policies to claw it back for redistribution by the Government: not employers.
Weak………so weak.
There is a long way to go
This idea is a truly horrible one. It’s not giving power to “the workers”. It’s the government taking power – and money.
There are so many things wrong with it I don’t know where to start – but i’ll have a go.
1. How many companies will stay listed in the UK if they know that the government is going to demand 10% of the company for nothing. And who is to say it will stop there? When a Labour government inevitably runs out of money what is to stop them demanding more of the company, and effect nationalisation by the back door.
2. It will badly affect smaller but growing businesses. Either you have to give 10% of the business away or not increase in size past 250 employees to avoid it. Or simply move the company abroad. Either way it will do nothing for job creation.
3. The workers aren’t getting the shares – that is a fig leaf for government appropriation. The workers don’t won and can’t sell those shares, so it is simply owned and controlled by government.
4. Limiting the dividends is simply a massive tax grab. If you can only get £500 of dividends a year, and you shares are going to get diluted by government ownership, why hold them? it would lead to a massive selloff of the equity markets.
5. Limiting dividends would also destroy pension funds. As above, it would likely send share prices plummeting, but a lot of pensioners incomes come from share dividends.
6. Putting workers on boards sounds nice in principal, but if you look at the small print they are saying that it can’t just be any worker. Those workers would HAVE to be members of a union. And surprise surprise, the unions and Labour are joined at the hip. This is another clumsy way of Labour trying to get more power and control private industry.
All in all, these plans would cause untold damage to UK companies, and the economy as a whole. Why invest when the government will take a large chunk of it, limit how much you can make from your investment and then send political placemen to sit on the company board as well. It would cost the country jobs, productivity and in the end general wealth and economic well-being.
I was probably going to vote Labour. After this – not a chance.
You do know what Labour is about, don’t you?
It’s not neoliberalism lite, in case you had not noticed
Well it certainly doesn’t seem to be about any sensible or realistic ideas. It is sounding more and more like old school Marxism, with government and their allies controlling all aspects of the economy and using their mob of hardcore supporters to threaten and bully those who disagree.
I wanted to see a change of government, and could just about accept that anti-semitism in the Labour party was confined to a minority and hold my nose at it, but I can’t ignore the damage this economic policy, amongst other terrible ones, would do to the UK and it’s economy.
Just throwing around the word neoliberal doesn’t really cut the mustard either, and doesn’t make this policy anything less than a ridiculous and stupid one – because of the damamge it will cause.
For heaven’s sake! People owning shares is Marxism
I think you need to stop being very stupid
I use the term wisely
“[CB] I think you need to stop being very stupid”
Richard your restraint is admirable as ever.
I don’t know why you didn’t post my response – probably because it doesn’t suit your points or it disagrees with you.
The point is though, is that this isn’t people owning shares. The share go to the government, and are controlled by the government. The employee can’t sell them or do anything else with them. At best they MIGHT get a small dividend.
This policy is nothing more than dressing up part nationalisation of companies by stealth, and a huge tax increase on investing and pensions.
And that’s before you take into account the damage this policy will do to investment, job creation and economic growth.
I asked why would anyone set up a company in the UK when corporation tax rates will be higher, investing in a company will be pointless as you can’t make a return on your investment, and the government will simply expropriate 10% of the company anyway. Why set up here when you can set up next door in Ireland, for example, and not have to worry about what the Labour government will take from you.
Likewise, how will a UK company compete with a foreign one? A Labour government won’t be able to force this policy on other governments or foreign companies – so they will have a huge advantage over their UK peers.
You claim to be a professor of economics. Surely you can see this, or do you have some argument as to why this policy will work? Rather than just trying to call me stupid – which is rude and downright egotistical of you.
Please note my arguments this morning
And please note I explained on this boing yesterday that I was not in Liverpool because I had a family meeting on my afther’s funeral. But you thought yourself more important and that I should have been reading your comment, which says all I think I need to know about you.
You will be deleted from now on. I have already provided detailed commentary on the Labour proposals. If you had an iota of ability you will see I have critiqued them and think them in need of refinement. But you just play at straw man comments. No wonder we have such poor politics in the UK. People like you won’t debate, you just abuse, and this is not the place for that.
Well, I am sorry to hear about your Father, but I complained about you not posting my piece because I had seen various other posts go up after I have written mine.
Your detailed commentary doesn’t cover the issues with those proposals. Just like your answers to me haven’t dealt with the questions I have raised.
“But you just play at straw man comments. No wonder we have such poor politics in the UK. People like you won’t debate, you just abuse, and this is not the place for that.”
My comments are not straw men. I have set out specific problems with the policy. You have given straw man answers at best, and have dismissed my points, refused to debate those points and abused me by calling me stupid.
It’s no wonder we have such poor political debate when people like you won’t debate – because they are unable to admit the deficiencies of what they are arguing for for purely factional reasons. It’s also no wonder we have such poor teaching at universities at the moment if you are an example of what students have to put up with.
Do you realise how conceited and arrogant you sound? Not least because I have pointed out issues with the policies – I am no apologist for Labour. And because yes I did clear some other comments because they were coherent and sensible and I could not face fools after the session I had last night
Now politely, go away
CB
Now come on – why would allocating shares to workers of a company be a threat to company when it would be in the workers interests to work well in order to maintain the value of those shares? It’s a good motivation. It’s been done before you know. When I worked for Tesco when it was manged by Sir Ian MacLaurin, staff used get shares allocated and it was really useful but also made you feel more committed to the company. I’m not sure if they still do that or not.
And what about the long term commitment to the firm those shares might engender when compared to the short termism of other shareholders who want to make as much money in the shortest time possible and create huge pressure on management to slash R&D, wages, move abroad etc., to pay back unreasonable returns?
Management under the Labour plan would have to work with the worker AND the external investor – a new form of balance could be formed that tips balance back towards production and away from pure finance and the hollowing out of firms by investors. And this might help the firm too.
All this is missing from my POV is the major cash injection into the economy in the form of MMT or Peoples QE which Labour should have got its head around by now.
But honestly CB – think again and give it another chance – it’s a start. The work place these days is one of the most undemocratic places around – and that is because finance likes it that way and that has gone on for far too long.
CB says:
The McDonnell proposals won’t work as they are intended to because the private sector will simply not play ball and run rings round it.
McDonnell needs to think this through; because most of the CB objections look sound to me as reasons why such a plan is in tatters before it begins to be implemented. Can’t imagine why CB was ever considering voting Labour except as a measure of his frustration with a totally incompetent and malign Tory government.
If it is a backdoor route to nationalisation of what needs re-nationalised, I’d rather see the front door used. Why run things into difficulty and then re-nationalise the remnants and have to rebuild from the detritus ?
Neoliberals from both sides of the house need to get their heads round the fact that a private sector cannot thrive without a public sector social and economic infrastructure.
The private sector is in deep, deep do dos and ready to fall apart. What’s happening on the High Street is not just symptomatic of a change in shopping habits; it’s fundamental terminal decay across the whole private sector of the ‘real’ economy.
thing about national wealth funds is they only seem to work where there is strong consensus or coercive politics as in scandinavia, SIngapore, Russia or China. Anywhere else and the temptation of one side or other of politics to raid the piggy bank. In the case of Malaysia a source of outright corruption and embezzlement. Doubt UK politicians qualify as mature enough…