George Osborne's latest flop over 'shares for rights' is typical of modern government

Since it became law the Department for Business has received only four inquiries, but this measure's history says a lot about the replacement of ideology with marketing


It was the lead story in the Financial Times on Saturday: “Osborne shares for rights plan flops”. Yet when the Chancellor of the Exchequer first announced that employees could be given shares in the businesses they work for in return for giving up their employment rights, he was lyrical in describing his proposals. He introduced them at the Conservative Party Conference in Birmingham last year in language that counts as uplifting on such occasions. Mr Osborne told delegates that “we will be the Government for people who aspire. Our entire economic strategy is an enterprise strategy”. And so on.

Here is the deal as he explained it. “You the company: give your employees shares in the business. You the employee: replace your old rights of unfair dismissal and redundancy with new rights of ownership.” And we, the Government? We will “charge no capital gains tax at all on the profit you make on your shares.” Then George Osborne seemed to make fun of himself, or perhaps of the Prime Minister, with his Big Society ideas: “owners, workers, and the taxman, all in it together,” he added.

However just five minutes’ thought would have been enough to show that this was a pretty stupid idea. How exactly would employees value the rights they were being asked to give up? Wouldn’t they smell a rat? Would they not think that they would be done out of their employment rights when they most needed them, in return for worthless shares? And would the typical, medium-sized enterprise, with shares tightly held and rarely traded, want the bother of making a new issue? Just completing the documentation would be a formidable task. Worse still, it quickly became apparent that the scheme could open the door to fresh tax avoidance opportunities. As Paul Johnson, director of the Institute for Fiscal Studies, commented: “Just as Government ministers are falling over themselves to condemn such [avoidance] behaviour, that same Government is trumpeting a new tax policy which looks like it will foster a whole new avoidance industry.”

Then, when the Government asked 209 businesses last year for their comments, only five gave their full support. Yet despite this disappointing response, ministers pressed on. And now it turns out that since April, when the plan became law, the Department for Business has received only four inquiries and HM Revenue & Customs just two. What a flop! It’s not going to fly. The relevant clauses in the Enterprise and Regulatory Reform Act 2013 will scarcely ever be used.

The history of this minor measure says a lot about the quality of Government. What was the attraction of the scheme to Coalition ministers in the first place? As an unexamined notion, it perhaps seemed a good idea that workers should own shares in the companies for which they work. In particular, as one official remarked, ministers had in mind “innovative new start-up businesses that are keen to grow and to share ownership”. I believe quite the reverse. It would be foolish to trade away your redundancy rights in return for shares when there is any risk of your company going out of business. You don’t want to lose part of your savings at the same time as you lose your job.

A second factor in favour of the scheme must have been that it was anti-union. But is trades union activity really a problem for the British economy at the moment? Only, I would say, where trades unions have obtained a blocking position on certain public services such as the London Underground. Otherwise not.

So how should the Government have proceeded? Before making an announcement at a high-profile occasion like a party conference, it should have carried out research to discover whether the proposals had merit or not. This begs the question, what is “merit”. My answer would be that the plans would have merit only if they were likely to contribute either to economic growth or to fairness.

As far as one can see, the Government did none of these things (and there is a reason for this that I shall come to). They are such elementary preparations for any sort of policy making that they could well be taught at school. But there was still one final step to take. Before going public with the new initiative, the Government should have undertaken some user testing. Actually it did this when it asked the 209 businesses what they thought – but by then ministers had already made up their minds. So that was a charade. And as to questions of merit, my assessment is that swapping employment rights for shares would contribute infinitesimally to growth and zero  to fairness.

What I have described is contemporary politics. I compress the basic rules. They are these. Ideology has gone. There are no differences of principles between the three main parties, only of emphasis. So general elections provide a choice between rival teams of political personalities rather than between ideas. These contests last not the statutory three weeks before polling day, but the entire space between elections. They are marketing battles, no better nor worse than the tussles between, say, rival brands of beer. In this context, only headline-grabbing announcements count. Say it loudly and clearly to an adoring party conference. Only when the applause has died away, do the work and pick up the pieces. The announcement is all that matters.

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Recruitment Genius: Head of Content and PR

£35000 - £37000 per annum: Recruitment Genius: We are 'Changemakers in retail'...

Recruitment Genius: PHP Developer - Mid / Senior

£25000 - £40000 per annum: Recruitment Genius: This fast growing digital agenc...

Recruitment Genius: E-commerce Partnerships Manager

£50000 - £100000 per annum: Recruitment Genius: This is a newly-created partne...

Day In a Page

Read Next
Zoe Sugg, aka Zoella, with her boyfriend, fellow vlogger Alfie Deyes  

If children are obese then blame food manufacturers, not Zoella

Jane Merrick
Amos Yee arrives with his father at the State courts in Singapore on March 31  

Singapore's arrest of a 16-year-old YouTuber is all you need to know about Lee Kuan Yew's legacy

Noah Sin
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor