The Deputy Prime Minister has urged employers to offer shares to their workers in order to improve productivity and unlock growth, while promising them tax breaks in return.
Nick Clegg told an audience at an event hosted by the City of London Corporation and the Centre Forum liberal think tank today that the Coalition Government was planning to reform the tax system in a bid to remove existing barriers to employee ownership and create what he described as a “John Lewis economy”.
The department store is owned by its workers and distributes its profits between them.
“We don’t believe our problem is too much capitalism. We think it’s that too few people have capital. We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like,” Clegg said.
What many people failed to realise was that employee ownership was a “hugely underused tool in unlocking growth” because staff were more engaged. “Lower absenteeism. Less staff turnover. Lower production costs. In general, higher productivity and higher wages. They weathered the economic downturn better than other companies,” the Deputy Prime Minister said.
Right to request shares
As a result, the Government is currently evaluating whether to introduce a right for workers to request shares in their employers in order to challenge today’s corporate culture and help usher in a new era of “responsible capitalism”, he added.
Business Secretary Vince Cable is expected to announce the measure, alongside a full package of boardroom reforms, next week.
But members of the UK200Group of accountancy and legal firms were less than enamoured of the proposals. Jonathan Russell, a partner at accountancy firm ReesRussell, said that, unless workers could see a simple mechanism from generating income from their share-holding, they tended to show little or no interest in it.
“What the average employee wants is a reliable and hopefully bigger pay packet, and ownership, risk and possible future gains do not feature highly at all,” he added.
David Ingall, managing partner at accountants JWPCreers, was equally underwhelmed.
“Employee share ownership is a step in the right direction, but is not going to fuel a resurgence in the economy,” he said. “Perhaps it is an indication that there may be other things in the pipeline that can lift the confidence that we need for the economy to begin to recover, though frankly, at the present time, just holding our own is as much as we can reasonably expect.”
