There is a growing awareness that bailouts of UK companies are now going to become a fact of life. Starting with airlines, and then extending far beyond that, very large numbers of companies are going to require state support if they are to make it through the coronavirus crisis.
I have previously indicated that I do not have a problem with this: the UK is a mixed economy and the survival of the private sector is important. However, most of that private sector is in a mess precisely because of its own mismanagement. Corporate greed, the use and abuse of tax havens, poor accounting, over declaration of dividends, under-investment, poor treatment of staff, the introduction of zero-hours contracts, the abuse of the climate, and ignoring all stakeholders but shareholders, has left large parts of our private sector enfeebled. If that sector is to be bailed out now then massive conditions have to be attached. I am suggesting these for starters, which any company getting support must agree to:
- Zero-hours contracts must be abolished;
- Trade union rights must be recognised and supported;
- A true living wage must be paid in the future;
- Its gender pay differential must be published, and it must have a policy for reducing it;
- Put its full accounts on public record, whatever its size;
- It may not use any tax avoidance schemes of any sort whatsoever;
- It must never use a tax haven;
- If it is a large company it must publish country-by-country reports;
- No one must be paid more than ten times UK median earnings;
- Every large company involved must have a plan for becoming net-zero carbon and must include the cost of that plan in its accounts, and make annual reports about progress on this issue;
- Publish information annually of the type required by the Fair Tax Mark;
- Dividends must be based on group retained earnings;
- No dividends should be permitted if group retained earnings would as a result be less than the last three years (in smaller companies, with five years being required in larger ones) average net profit after tax to encourage balance sheet resilience.
To enforce these conditions it would be reasonable to require that every single company taking advantage of these tax holidays should by legal automatic obligation be deemed to have issued 25.1% of its share capital to the government in exchange for the package that guarantees its survival, which proportion guarantees the government the right to block many shareholder actions in these companies.
An automatic right to appoint a majority of the board of directors in the event that the conditions of the bailout, as noted, are not met should also be implicit in the tax holiday terms.
You can be sure that those wanting to simply take a tax holiday to exploit the situation would be more than deterred by these conditions, but those desperate for the survival of their companies would not be. That is precisely why these proposals are fair whilst there can be no corporate exploitation of them right now.
If a package of this sort was assembled now, and it would be easy to write the relevant legislation, then I am sure there would be massive public support for this because it would guarantee jobs and a better and fairer society in the long term.
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Also no dividends to be paid to corporate shareholders (as with water/utility companies) while inbreceipt of aid/subsidy
Every single one of those requirements is logical, fair, and pertinent. Every single one of them is also contrary to the psyche of the Devil-Take-The-Hindmost (aka Conservative) party.
Hmmm, “Devil-Take-The Hindmost” sounds like a good definition for the word “plutocracy.” The system the UK seems to have operated on after ten years of austerity cuts from the Tory Party and according to research 120,000 unnecessary deaths:-
https://www.independent.co.uk/news/health/tory-austerity-deaths-study-report-people-die-social-care-government-policy-a8057306.html
After the coronavirus pandemic is over we’ll see how much the country continuous to operate as a plutocracy and not a fully functioning (informed) democracy.
Brilliant, time for responsible capitalism, nothing less should be tolerated.
Good list! I’m left thinking this “conditional” list should have been in Labour’s last manifesto!
While I like your conditions I also think there must be political choices as to which sectors get bail outs and which not. For example, no way do I think the passenger airlines should be bailed out. As I said in a comment to another article the covid 19 crisis is connected to an ecological crisis because the global economy has overshot the carrying capacity of global ecology. Your programme barely discusses that originating problem at all — except for the proposal that companies promise a “net zero” programme. Get real Richard — I’ve been working in the climate economics field for 20 years and all major institutions have climate programmes and they are not worth the paper they are written on. They all promise increasingly implausible technological solutions and these promises and plans function as fudges and means of avoidance. Either that, or, if you do have practical solutions tried they often make things worse. For example, if you ask the airline industry you will get plans all right — eg to use biofuels grown in Africa or elsewhere where forest systems are cut down — and you get new diseases as a result. The way that works is explained in these articles about ecological disruptions leading to the spread of new diseases: https://www.biorxiv.org/content/10.1101/2020.01.24.918755v1 and https://www.sciencedirect.com/science/article/abs/pii/S0001706X18304297?via%3Dihub
The truth is that this crisis is showing what is essential and what is inessential and bail outs should be only for the essential so that the economy shrinks in sectors like airlines. There is a trade off here — instead of an economy based on growth we need an economy where policy makers try to offer safety, resilient communities rather than growth of inessentials. Of course if there is no bail out for inessential sectors then there will be unemployment — other solutions are needed for that — like crash courses in organic agriculture and health and social nursing care which are online at first and then organised by state programmes to place with essential goods production in sectors that are struggling for labour.
I have sympathy with that
I gave already said airlines should be nationalised
Using people’s deaths to play politics is the lowest level you have yet reached, and you and your ilk, and your incredible insensitivity, will be remembered long after the dust clears.
You haVe drastically misread the public mood, so I hope you are all proud of yourselves because you can expect a terrible backlash from society.
Evidence of the hateful insensitivity you and certain others have shown during this time of crisis will NEVER be forgiven.
I pity you all.
With respect, I am working like fury with people across the political spectrum to see what can be done to address issues
And if you’re not aware of it, financing usually comes with conditions attached
Why should this be different?
I think the problem is people like you who cannot drop your nasty politics right now
Just to be clear..,So if a perfectly solvent and productive business in normal time , through no fault of its own and because of a catastrophe of which it has no part to blame, does not agree to your long list of demands you would just let it die and all it’s staff lose their jobs?
Why not?
If they need help they have a price to society to pay for it
I think I’d give ’em the money now, and then legislate and regulate their arses off later. As long as that leverage were applied, that would do for me.
I just think they should know it’s going to happen in advance or they’ll sue…
That’s the way they are
“That’s the way they are”..
us and em in a time of a national emergency..you really are a piece of work
I certainly am
One working for the common good
‘With respect, I am working like fury with people across the political spectrum to see what can be done to address issues’
Well it seems we can add fantasist to your list of current ailments. You’re not working with anyone of any consequence, because if you were, they would be telling you that saving people’s’ lives was the ONLY issue at present, not reshaping the post-virus political and economic landscape into one approved of by R Murphy esq and his sociopathic tendencies.
You would be making a much more valuable contribution if you just got out of the way of people who are trying to help society, and who know what they are doing, instead of desperately, and hopelessly, trying to insert yourself into the narrative.
I can only concur with one of your previous commenters that history is going to judge your ‘ contribution’ to the current crisis very harshly. Trust me, this will be the end of any slim influence you might ever have had with even fringe elements of society.
And like a proper coward, I’m assuming you won’t publish this.
Sure I’ll publish this
Why not look at what I’m seeking to do and stop the utterly destructive bullshit commentary?
And no. I am not disclosing who I am talking to, for very good reason: they do not need abuse from the likes of you
All I can say is I am glad people like you are not in charge.
You have used this crisis to push forward your own nakedly political hard left agenda. More nationalization, more government control and more union power. Add in a few sops to your own projects (like the fair tax mark and the corporate accountability network) so you get something out of it as well and we are pretty much on point.
Fortunately, as much hot air as you like to blow, nobody important is listening to you. Labour and Corbym lost the election heavily, the Labour party is finished as an electoral force for a generation and the people of this great country seem pretty happy about how the government are handling the crisis – judging by the opinion polls.
There was no “massive public support” for nationalisation then, and there would be no massive public support for you policies now. The only support, as ever, would come from a coterie of the hard left and the sycophants who agree with every word you say on this blog.
You may have noticed that the whole world is socialist now
And that’s because markets have failed
I also note you have multiple identities
Your time here is over
“You may have noticed that the whole world is socialist now. And that’s because markets have failed”
The coronavirus is because markets have failed? It’s because people travel from country to country! You promote open borders through the EU. If i was equally as dogmatic i could argue the spread from Italy for example is because of open borders across EU countries. Can you see how absurd it sounds.
If you think times of national emergency like this, terrorist attacks, times of war etc warrants the help and leadership of the State only at the cost of the State having control all of the time then you are a very opportunistic and cynical individual.. you even wrap your own ideological agenda up in the case of the greater good. You put even the worst of politicians to shame.
The world has changed forever
Deal with it
Sensible people are
There’s nothing cynical about what I suggest
I want a resilient world
What do you want?
Roy Lilley who writes on the NHS (and whose pieces I’d recommend) puts it well in his latest piece
http://campaign.r20.constantcontact.com/render?m=1102665899193&ca=0ac7bc0b-b155-450b-bc5f-4c20ce1f3cec
As he says, the crisis shows how today’s markets and ultra-capitalism are having to be bailed out by the state. Like it or not, socialism in effect bailing it out. Today’s stripped down, hollowed out, debt laden, businesses and markets are deeply vulnerable and unable to cope.
That is not an argument for some kind of Eastern European state – been there, done that, it failed in almost every way. I’ve seen the results first hand. But it is the argument for a massive rebalancing back to a stronger, properly funded state in which businesses (and individuals) recognise their obligations and responsibilities. The day of the vulture capitalist, wealth extracting business, avoiding wherever possibly it’s obligations and responsibilities, has to come to an end. They’ve been brutally exposed in this crisis. That won’t happen without a struggle.
Richard’s checklist is a pretty good start. We can look to Scandinavia for examples of much better balanced societies where people and companies recognise obligations as well as rights. And no they are not perfect but it is possible.
But the utterly selfish and destructive, Friedmanite and Randian view of the world has to be utterly dismissed. I’m picturing a book burning here!
There is a huge opportunity for political leadership here, coming up with that new vision with policies to implement them. That’s not the decrepit ‘disaster socialism’ being hawked by sections of the left. The answers are not to be found in dusty old ideological tomes. It absolutely puts climate change at the centre.
I do not identify as a socialist, and know little about economics. I do know that in the end everything comes down to either love or fear, and it appears to me that those who attack Richard’s proposals may be doing so out of fear of loss of their perceived advantages or privileges. I could be wrong, but if the cap fits . . . . As for as the result of the election proving anything in the long run, I also know that it is unlikely that a truly good end can come by such means.
I am pleased we have a government that doesn’t entertain ideas like this.
The idea of bail outs is to ensure there is a business landscape in place when we exit this crisis. This is there for everyone’s benefit, not just the individual company’s benefit. Therefore, bail outs must not be subject to conditions of the kind you suggest.
It has echoes of communist countries, where party membership was a condition for promotion, education etc. People made choices with a ‘gun to their heads’. We can’t have that here.
Actually Barry, you may not be aware that all finance carries conditions
Why shouldn’t this?
These are unusual circumstances where people and businesses are restricted in their activity to meet a common good. Restriction or discontinuation of activity is not a choice.
Using such circumstances to impose conditions as you have suggested is as unconscionable as requiring party membership for any promotion, education etc. in communist days. Or religious adherence in other times and places.
No thanks, you haven’t persuaded me. We don’t have it, and I’m glad.
With respect, stop being a crass idiot
And look up what idiot means to find why I say it
Richard there is some merit in what you say as China, appears to have eventually dealt with the outbreak successfully and North Korea has had no confirmed cases. Maybe the question we need to ask is do we want a society heading towards the Authoritarian command State or the more liberal one we and the west have been fortunate to live in. That is what you are suggesting or certainty heading towards.
I am completely committed to the mixed economy and the role of the private sector in it
Stop talking pure bullshit
Barry you need to read Karl Polanyi. He tells you there’s no such as pure utopian Market Fundamentalism (Self-Regulating Markets). He says those with power often being those who control large amounts of capital or their politician enablers usually attempt to get parliaments or governments to rig the market rules in their favour. Polanyi also says there’s always kick back if those rules are selfish and cruel. Indeed universal suffrage is one such kickback ans so are trade unions.
Thanks
@ the dissenters – which of the points do you object to and on what grounds? Maybe Barry M, Charlie or Arthur could critique them individually so we can see which is/are so obviously part of a secret communist manifesto, which I must confess I hadn’t until now noticed and will crush (what’s left) British business.
Is it abolition of Zero Hours Contracts which are clearly entirely fair from a business point of view but perhaps not from the perspective of someone seeking work?
Or is it having to make accounts public so that the public and scrutinise them?
Or maybe it’s just fine for companies to hide money in tax havens – why can’t we all do that?
Or maybe it’s the earnings cap? After all CEO’s earning millions is because they are so clever, hard working and wholly responsible for a company’s success (but not their failures).
Just asking.
Would be good to hear what is really so objectionable in good corporate governance supported by most pension funds now….
I agree some of the you are making are perfectly reasonable.. to try and impose them at a time of crisis is what I object to. And make no mistake Richard is being very cynical about doing that.
Me and the vast majority of reasonable people in the country who are fed up with bailing out big businesses time after time and don’t want to do it again, that is…..
“Me and the vast majority of reasonable people in the country who are fed up with bailing out big businesses time after time “
Well at least you show your stripes instead of hiding behind “saving the country” bullshit…not sure on this occasion “reasonable people” want their company to be used as a political football when it has been hit by a crisis which is no ones fault and couldn’t be avoided… a cynical attempt to advantage your ideology when the country is shitting itself..
Why are you so desperate fir business to fail at cost to society?
Please tell
We could alternatively let businesses crash would you prefer that? After all, that’s playing entirely into the ‘self healing’ free market philosophy that corporates have used to justify their behaviour for decades..!
If corporates cannot weather out a storm and need PUBLIC bailouts to survive why should the PUBLC be burdened with debt with nothing in return ? It’s a fair exchange of power (for the few, from the many) to give “life support” to businesses who frankly have revelled in abusing their position, at the publics expense, ceaselessly. This is about a functioning economy that works for all, not partisan politics..
And I’ve never struggled to understand why it’s not accepted that … regulation is a primary function of governance : having _the right amount_ of regulation is neither a left or right ideology.. it’s about outcomes, rather than a priori ideologies (eg “shrink the state”)
I see a few commenters here are taking ad hominem shots Richard, it’s your blog but IMO trolls angst and astonishment that companies wanting corporate welfare doeasn’t contribute adds much to the discussion..
Sorry that’s what I meant – make it clear that things will change later but just deal for now with getting the money out and working as fast as possible – the delivery of the cash is priority that is going to be a major operation for which already hollowed out services might struggle. But I would make it absolutely clear that enhancements required following up on the Government’s side of the bargain were just around the corner and will be next.
As you have said, for the notion of the ‘primacy of markets’ the game is now over. We are going start to do things properly around here because doing so protects the very markets who think that they don’t need it. Anyone who doesn’t agree with that can bugger off to the States as far as I am concerned.
First off – Richard’s list looks OK to me. Sadly it won’t happen and it won’t happen because of the reactionary opinions given on this blog, opinions which are held by a majority of voters in this country. Some of the opinions seem to accuse Richard of feelings that are out of the IDS handbook. I guess these critics agree with everything IDS says about the less fortunate in our society but when any criticism is raised about the beneficiaries of Tory policies they trot out all the usual politics of envy b*llsh*t. I hope this crisis doesn’t turn out to be as bad as predicted. I hope it leads to a positive change in our politics but it does require the Labour Party to stop acting like Tory Lite which appears to be its default setting, still.
I am signed up to stand with you, Richard.
When I started to read this thread I wondered when the neoliberal utopians would blunder in.
It must be a shock to their system when the system they place so much naive trust in, shows that it has feet of clay and wears the emperor’s clothes.
They need to be reminded that the economy is a human construct, and that it has grown into a form that does not suit proper human purposes. As such, it is subject, as is almost everything else, to political choices and decisions, which need, above all, to suit everyone for a change.
Greed and selfishness have led us here. They need to be put in their place to get us out of it.
“Greed and selfishness have led us here. They need to be put in their place to get us out of it.“
The class war rhetoric is ill judged, naive and completely out of line with what is happening. Greed and selfishness has led us to places that might not be ideal but it isn’t to the middle of this crisis!!! Out of China and caused by open borders and free movement. North Korea is probably the only country where it will never reach!! Pick the bones out of that.,
With respect, the economic crisis this will cause is home made
And why do you so strongly want to preserve the conditions that created it?
Please tell
Or stop bothering us
A wholly reasonable request, I would have thought.
It is revealing that you base your arguments upon the denial of reality.
Such is indicated when you refer to it in such terms as “Class war rhetoric”.
I think the better term would be “Class conflict”, because politics is a continuous and permanent balancing of conflicts of interest, sometimes going one way, and sometimes another.
For four decades it has been in the direction of “greed and selfishness” in the interests of those at the top of the income tree.
We all know the words of Warren Buffet on this matter, so I rest my case.
“They need to be reminded that the economy is a human construct.” Exactly! This was Karl Polanyi’s central point that the way the majority of human beings want to relate to each other (balancing their individual needs against those of others) in other words sensible human relations need to be embedded in the economy. He declares the concept or ideology of Market Fundamentalism (Self-Adjusting Markets) to be half-baked and therefore utopian because it doesn’t make sufficient effort to embed sensible human relations.
Note he does not condemn Market Fundamentalism outright simply that it’s imperfect as pursued by many right-wing Libertarians who often will have the hidden motive of greed or selfishness in supporting MF. Greed and selfishness are psychological conditions usually stemming from poor parenting which didn’t stress to the child the need to seek balance in human relations. Richard Murphy simply seeks to pursue a better balance in human relations. So critics need to argue the merits or demerits of individual items on his list not engage in generalised snarky comments!
Precisely
And thanks
You don’t mention bonuses. There has been a horrible tendency of giving vast bonuses to executives of failing businesses, and that has to stop, which it won’t unless they’re forced to stop it.
You also don’t mention pensions, pension funds must be kept separate from company funds and not raided by the company when they want some cash.
Otherwise, I agree with the commenters who think there should be distinction between those companies who are socially useful, and those which are an ecological disaster. We could really do with less cheap flights and less cruise ships, so why bail them out – they should have seen the future trend.
Pay includes bonuses in my book
Whilst pension funds are pretty well regulated already
In order to not break the 10 times median wage rule, bonuses would at the very least have to apply proportionally to every employee. But better still, why not add the rule that every employee must received the same amount as a bonus no matter how much they earn? You cannot be a CEO without the hundreds or thousands of staff actually doing the work. Those who are paid the most already get enough from their high salary, effectively already getting the biggest share of profits, and those who are poorly paid will get the biggest relative increase in salary to share in the profit of the company. Because we have a suck-up economy, it will be a massive boost to the economy regularly rewarding those paid the least and reducing income inequality.
There are some workers who probably should be mentioned. Sales staff should be paid a fixed salary rather than a base salary plus commission, because they get overpaid compared to the people who actually do the hard work of producing or delivery the product. Secondly, bailed-out bankers should be banned from taking 20% of profits from investments – on top of fees that pay salaries – since this breaks the bonuses rule. This would immediately increase investors‘ income by 25% – including pension funds, which would be a massive stimulus to the economy.
The only thing left to fix are the exploitative high rents and dysfunctional housing market, which makes house ownership or even paying rent difficult for most. Not to mention that house price rises increase GDP but are underrepresented in inflation indices. This irrational situation encourages governments to increase how prices rather than control rents to make housing truly affordable, which in turn ensures wages are insufficient to cover the cost of living, because pay rises are often based on inflation rates instead of cost of living measures such as the Minimum Income Standard (like the true Living Wage).
I think many if those wage suggestions move into the territory of unacceptable micro-management that will be evaded
I think we have few on here who believe in Friedman’s view that “Corporate social responsibility is pure and unadulterated socialism” whereas, of course, “The Social Responsibility of Business Is to Increase Its Profits”. Nevermind all the privileges, benefits and subsidies the State provides for business, for example, the infrastructure, the health service, an educated citizenry, law, police and so on and on, before we even get to the tax breaks, light regulation, receptiveness to lobbying, access to ministers – benefits available to few other citizens but which big business particularly seem to enjoy as a right.
Anyone who suggests this might not be to the benefit of all citizens and that recipients of State “corporate welfare” (Robt Reich) might have to submit to some obligations is greeted with howls of anguish and cries of “totalitarianism”.
“Why are you so desperate fir business to fail at cost to society”
The coronavirus is an enormous cost to society and the damage to business is one component of that. I have previously said some of the ideas i would support but it is the cynical opportunism is what i cant stomach and now is not the time to impose ones political ideology at a time of extreme crisis. Do that that through the democratic channels when people are not worried about their very survival.
You are just being crass
Conditionality is normal on loans
You have now wasted enough time
Expect deletion now
Friedrich Hayek suffered from limited ideological competence in his mania for Market Fundamentalism and contempt for government planning precisely because he was blind in regard to recognising capitalists sought control over governments in order to “plan” the optimum administrative and legislative environment for their capitalist operations.
Just to pick a few of your less overtly political suggestions (never let a good crisis got to waste – I’m sure this government won’t):
* If the government is to require business to pay a “true living wage” why not just increase the minimum wage? Why allow other business to pay less?
* I certainly have sympathy with requiring a company to put its “full accounts on public record” – the abbreviated accounts (often little more than a balance sheet) appearing at Companies House in the last few years is atrocious. Again, this should be a regulatory requirement for all companies, not just ones that accept emergency funding.
* How would you define “not use any tax avoidance schemes of any sort whatsoever”? When is something a legitimate opportunity provided by the legislation, and when it is impermissible tax avoidance?
* “never use a tax haven” – what is a “tax haven” in this context? Do you have a list? Does it include the UK or the US?
* “Dividends must be based on group retained earnings” – as opposed to what? Dividends being paid unlawfully, without sufficient distributable reserves?
And what do you mean by “by legal automatic obligation be deemed to have issued …”? Do you mean that the government will actually acquire 25.1% of the shares in these companies? Or that they should be treated as doing so, for voting purposes, without actually holding the shares? Does the government get dividends on these “deemed shares”, for example? And what if the company simply sell its business to a new company that is not subject to these restrictions?
a) Already dealt with elsewhere
b) Accepted, but I am using leverage
c) Spirt of the law
d) TJN FSI over 65
e) Dividends are now based on parent company retained earnings not group retained earnings – bizarrely
And 25.1% is automatic right by statute whether the company agrees or not or records it or not – with full shareholder rights including dividends. This is a minimum
Fascinating… a looming catastrophe made inevitable by the Governments tardiness & social Darwinist tendencies where it was willing to tolerate thousands more citizen fatalities in order to prioritise the interests of business…and here we are being told after this failed policy that the same public whose lives it has put in jeopardy must pay to ameliorate the catastrophe it caused and agree to hand over limitless public largess to ensure the survival of businesses… and yet it seems from reading above that its supporters object voraciously to any future monetary or social reciprocation of any kind?
Its a remarkable one way street of a type we have seen before but more deadly that’s for sure.
When this viral “war” is over: and indeed its a real possibility that there may be more Britons killed of Coronavirus than died in the second world war, are you going to tell the survivors:
“Well, its all its back to normal now… thanks for all the money…oh and the lives of your families: now it’s time you got back in your place”?
Richard may be deliberately misjudging the government: he is doubtless aware that they will not institute any of this, but is he really misjudging how the public will look back at this event?
When we emerge from this do you not suspect in common with all wars of sacrifice that they might believe they deserve to return to something more positive than merely being saddled with the bill?
The question is, just what are you offering gentlemen and will it be enough?
Wow, am I naive! I read Richard’s blog and thought, right, now he is going to get an unbroken series of positive comments. Instead he appears to have plugged briefly into a nest of extreme Trump supporters.
Well, now we know just how fearful these beneficiaries of neoliberalism really are, and that there is no way that they will let go their hold on the broken branch that is current capitalism.
Sadly, they will be encouraged by the dreadful press we have. I hope somehow we can do something about this, because we must change everything, starting with the Companies Act 2006, Part 10, Chapter 2, paragraph 172.
That is on my agenda…
Agreed Helen.
Von Hayek never even considered human altruism in his so-called theories. There is an interview of him on Youtube saying so (I saw the clip in an Adam Curtis film).
You know, one day people like Ayn Rand, Fred Hayek, Milton Friedman, Charles Buchanan and the like will be seen for what they are – nothing but anti-social delinquents.
[…] are failing and that large parts of the economy will not survive this crisis is growing. I have already made it clear that I think that conditions must be attached to the bailouts that will inevitably follow, but this […]
Oh, thought I had posted something last night. Let me try again.
If we want employers to pay a “true living wage”, why link it to the coronavirus bailout? We could simply increase the minimum wage for all employees. Why permit other employers to pay less?
I agree…but we don’t so far, so why not link it?
The living wage is regional
That statutory minimum wage is not
That is basically the difference
Well, Richard you have upset the middle England Tory followers, good on you keep up the good work.