Nick Clegg calls on firms to help build a 'John Lewis economy'
Posted by Natalie Brandweiner in Finances, Business trends on Mon, 16/01/2012 - 13:36
Nick Clegg has called on businesses to offer shares to their employees, saying it will boost productivity and unlock growth.
In a speech to the City today, the deputy prime minister encouraged firms to follow the model of department store John Lewis, which is owned by its employees and shares its profits between them.
Clegg said the government will look at measures to encourage employee ownership, such as the introduction of a right for workers to request shares in their companies. Tax breaks for firms providing employee ownership scheme will also be examined.
He said: "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."
The deputy prime minister added: "And what many people don't realise about employee ownership is that it is a hugely underused tool in unlocking growth.
"Firms that have engaged employees, who own a chunk of their company, are just as dynamic, just as savvy, as their competitors. In fact, they often perform better."
However, accountancy firm James Cowper said employee share ownership schemes will have little benefit for the majority of firms, and may even result in employees facing high tax charges.
Sharon Bedford, a business tax partner in James Cowper's Oxford office, said: "For the vast majority of privately owned businesses it is a tax nightmare and offers no real incentive for employees."
"Because of mind-bogglingly complex changes made to the tax rules by Gordon Brown in 2003, employees may find themselves facing an upfront tax charge on receipt of any shares and then find that there is no way for them to benefit from ownership."
Shadow business secretary Chuka Umunna said Clegg was following Labour’s lead on responsible capitalism: "Ed Miliband has led calls for a more responsible capitalism and, despite having first scorned Labour's initiative, David Cameron now claims he has become a convert to the cause," he said.
The shadow minister added: "The question for both him and Nick Clegg is whether they have the courage or the conviction to make the change that is needed."
At today’s event, hosted by the City of London Corporation and the Centre Forum think tank, Clegg also called on large companies to open their books and show how much is spent on executive pay.
Business secretary Vince Cable is expected to unveil a full package of boardroom reforms next week.
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