Bosses who sell their companies to their workforce will be rewarded with tax relief under a £50m government plan to be announced by Nick Clegg today.
The Deputy Prime Minister will unveil proposals to boost the number of employee-owned firms as part of his drive to create a “John Lewis economy.” Owners who hand their workers a controlling stake will pay lower capital gains tax, which is normally charged at up to 28 per cent when assets are sold.
Firms in which employees own a significant stake have a combined annual turnover of £30bn, more than 3 per cent of GDP. Mr Clegg will endorse plans by the Employee Ownership Association to raise this to 10 per cent of GDP by 2020.
Speaking in London, he will say: "My goal in government is to help lay the foundations for a stronger economy and a fairer society and employee ownership helps do both. We know our economy needs to be rewired to properly assess and share risk, to properly motivate and reward workers and to think for the long term.”
George Osborne, who included the £50m fund in last week’s Budget, came under fire yesterday over his plans to boost home ownership after the Office for Budgetary Responsibility (OBR) warned they could raise house prices in the short term and suggested they would not tackle housing shortages.
The Chancellor defended his plans when he was quizzed by the all-party Treasury Select Committee. Andrew Tyrie, its Conservative chairman, asked him: "You are not concerned that we are just ploughing money back into the boom-bust property cycle?"
Mr Osborne replied: “"I don't detect that we are in the middle of a housing boom. I think we are in a very unusual situation after the financial crisis. Families are being priced out of the housing market and that is neither economically right nor socially fair."
The Chancellor insisted his £12bn plan to guarantee mortgages by helping buyers raise their deposit would be time-limited to three years. He refused to promise a ban on allowing people to use the scheme to buy a second home, despite Labour branding it a “spare home subsidy for millionaires.”
Mr Osborne said families sometimes had two mortgages for a limited period when couples divorced or people moved to a new area to take up a job. “The absolutely clear intention of the scheme is to help people buy their first home or move home as their family grows,” he said.
The Chancellor said: “Mortgages and the availability of mortgages are not just a demand issue they’re also a supply issue. It’s difficult for builders to build new homes if they’re not sure there are people out there who can afford them.”
But the OBR’s Steve Nickell told the committee “The key issue is, is it just going to drive up house prices? By and large in the short run, the answer to that is yes. But in the medium term, will the increased house prices stimulate more house building? And our general answer to that would probably be a bit, but the historical evidence would suggest not very much.”
Mr Osborne said the Treasury’s long-standing practice of pre-briefing Budget measures to selected media outlets "clearly can't continue" in the same way, after the London Evening Standard’s front page, including details of last week’s package, appeared on Twitter before his Commons statement.