Margareta Pagano: It shouldn't be so taxing to bring in share ownership for the workers
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Wednesday 18 January 2012
If Nick Clegg is serious about encouraging a John Lewis-style economy and not just after a few cheap headlines, the Deputy Prime Minister needs to do a little more homework. Three telephone calls should do it.
His first one should be to Tim Watts of Pertemps, one of the country's biggest recruitment agencies, who knows more than most about the huge attractions of employee share ownership. Watts is chief executive of the Birmingham-based recruiter, started by his mother more than 50 years ago, where 300 of the 540 staff own 39 per cent of the shares. Now in his early 60s, Watts has always encouraged his staff to own Pertemps shares, either by buying them directly through Sipps, by awarding them to workers as a reward or through share option schemes.
It's been a success; Pertemps is top in the Sunday Times list of best places to work and staff turnover is low in a high-turnover industry – most workers stay at least five years. Dividends aren't paid to staff but they realise their investment when selling the shares. The internal share market is fluid, and the shares have risen year on year as Pertemps goes from record to record.
So what's the problem? Well, Watts wishes to retire soon and wants to hand over or gift the bulk of the 60 per cent shares he owns to all the employees. But he tells me that negotiating this with the tax authorities is a nightmare; he's been struggling for years to find the best way of giving the shares without either him or the staff ending up with big tax bills. Other businessmen I talk to say the same; they have wanted to hand over shares, or sell them, but have given up because of the henchmen at HMRC.
Then Clegg must chat to Andy Street, chief executive of the John Lewis stores, who will give him the best insight into what makes JL so magical. When talking to Street just before Christmas, one of my questions was why, if the JLP is the Holy Grail, aren't there more companies like it? In Street's view there aren't more because philanthropy on such a grand scale is rare, and also because of penal tax charges. The reason why the founder, John Spedan Lewis, gave away his company is key; he did so to find a new way between capitalism and Bolshevism, one that involved all staff in a "parliament" of partners. That's why the JL constitution is as vital today as it was 90 years ago; it lays down the rules, and the devil is in the detail, as it's the little things like how the boss can't earn more than 75 times the lowest paid which are intrinsic to the philosophy. Indeed, what surprises me most in this new crackdown on boardroom pay is that Clegg, and fellow ministers, are so opposed to workers' representatives sitting on company boards. John Lewis has them, as do most European companies that have much smaller gaps in salary between the top directors and workers than in the UK. What are they so scared of?
Clegg's final call should be to Brendan Barber, the TUC boss. He might ask why don't the unions demand a bigger part of the pie for their workers? I asked Barber the same thing recently and he confessed it's still a tricky issue for the unions, and indeed, many on the left. His excuse was that the unions feel uncomfortable about promoting wider share ownership because of the dangers for staff if they invest all their savings into one pot and the company goes bust. True, it's full of peril – look at Northern Rock, where staff owned shares. But it would be a pity if the Coalition's new proposals didn't have union support; they represent 7 million workers, a quarter of all the workforce.
Promoting the JL co-ownership model is a worthy ambition, and one I've been advocating for years so it's great that the politicians have at last woken up to its attractions. But if Clegg is to make such reforms real, he's got to get the tax right; it's not enough to promise tax breaks to companies which allocate shares. Instead, the tax rules, and amount of tax, on gifting companies must be reduced to make co-ownership attractive and taxes on share buying must be cut; there are four different taxes to pay when buying shares on the London Stock Exchange. Leave the rest to the philanthropists and entrepreneurs to get right.
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