You’d expect a declaration of class war by the main opposition party to merit at least a mention in the country’s tabloids. After all, on Sunday night Labour announced a SIX BILLION POUND RAID ON BUSINESS – the kind of thing one might reasonably hope to be screamed in huge font across the front pages and condemned in fist-shaking, bloodcurdling editorials. But nothing. Barely a squeak.
Just why that should be I’ll discuss in a moment, but first there is the policy itself – and a big, bold thing it is. At Labour conference on Monday, John McDonnell declared that he plans to force all companies with more than 250 staff to put 10% of their equity into a fund for their workers. Each employee will then be entitled to company share dividends worth up to £500 a year. Any extra will go back into public services.
The sums involved are massive: Labour calculates that 10.7 million workers covered by the scheme will get about £4bn a year in share dividends by the end of Jeremy Corbyn’s first term in government, while the public sector will receive an annual £2bn.
This also represents a big shift in Labour’s thinking. A few days ago, I met a senior aide to the previous party leader Ed Miliband who talked for a while about how, for all the rhetoric deployed by the new team, little of substance had changed in policy. “Apart from this stuff about a worker fund,” he mused. “Now that is big.”
Big indeed. This isn’t just about giving employees more money; it’s handing them a stake and a voice in the enterprises on which they spend most of their waking hours.
To do so, McDonnell will use the stick rather than the carrot, compulsion rather than encouragement over china teacups. His argument is that shareholders are not the only ones entitled to company profits: the employees and the rest of society (which pays for the infrastructure used by businesses and allows them the great privilege of limited liability) also have a claim. No wonder business lobby groups are furious, with Confederation of British Industry director general Carolyn Fairbairn decrying a “diktat” that will have investors “packing their bags”.
For decades, the British have practised a carelessness that lets the people wielding the biggest chequebooks buy whichever assets they like and do whatever they want. That attitude has allowed Philip Green to strip BHS to the bones, Kraft to run Cadbury into the ground, and Thames Water to be picked over by a consortium of international investors.
The rewards from all this carnage have flowed to one group: shareholders. In 2015, Bank of England chief economist Andy Haldane charted what has happened to workers’ share of national income over the long-run. He found that labour had been getting smaller and smaller slices of the pie: from 70% in the 1970s to 55% now. By his reckoning, employees get proportionately less now than they did at the very outset of the Industrial Revolution in the 1770s.
Had workers’ wages kept track with the rise in their productivity since 1990, the average employee would today be 20% better off. Or they could have three-day weekends all year long and still get paid the same.
To secure a real rise in wages will require more than waiting for the economy to recover from its decade-long slump and the labour market to return to “normal”. Hence today’s announcement. This is not to say I think it’s perfect. It won’t touch the likes of Google and Facebook, because they’re listed abroad. It’s not clear to me how it will affect Amazon, which has relatively few direct employees but warehouses full of agency workers. Labour says it has suggestions – I’m not sure Jeff Bezos will be listening. The opposition’s key challenge remains largely unaddressed, which is how to get private sector businesses to behave as if they’re part of the society in which they operate.
Like Labour’s tax on second homes, you can see what the party is getting at even while thinking that the proposals as they stand are likely to be gamed.
At the same time, it’s especially difficult for Theresa May to oppose. Don’t the Conservatives boast of being the party of shareholder democracy (even though share ownership has become less widespread since Margaret Thatcher came to power)? Didn’t David Cameron commission a report into companies owned by their employees, the first line of which read: “Employee ownership is a great idea.” ? And doesn’t all the evidence show that companies owned by their workers are more productive and stick around for longer?
The Tories’ uneasiness over how to respond accounts for part of newspapers’ silence on this Labour proposal. Add to that the agonies over Brexit that will be played out over the next two weeks of conference. But the closer Labour edge to power, the more scrutiny ideas like this will receive.
As far as I know, McDonnell’s policy has been tried in one other comparable situation. In the early 80s, Sweden’s Social Democrats promised to give 20% of company shares to workers. Named after its architect, trade union economist Rudolf Meidner, the policy was popular with the party faithful.
But in this polite and outwardly cohesive country, it caused outright war, writes Robin Blackburn in his classic history Banking on Death: “Business leaders were intensely alarmed and spent five times more money attacking the plan than the cash laid out by all the parties on the 1982 election. The privately-owned press ran a sustained and vigorous campaign … under assault, support for the scheme ebbed and the Social Democrat leaders believed that it was prudent greatly to dilute the scheme…” By the mid-90s, the policy was dead.
A warning there for all those gathering in Liverpool this week – and for anyone who believes workers should receive a greater share of the stuff we produce: get ready for the onslaught.
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