Conservative response to John McDonnell’s employee ownership plans

Responding, Liz Truss MP,  Chief Secretary to the Treasury, said:

“This proposal is yet another tax rise from a party that already wants to hike taxes to their highest level in peacetime history. It would make it harder for local businesses to take on staff and pay them a good wage.

“We have cut income tax for over 30 million workers, introduced a National Living Wage to give over 1.6 million people a pay rise, helped businesses cut unemployment to its lowest level since the 1970s, as well as introducing measures to increase employee share ownership.

“Only the Conservatives will make the economy work for everyone, where people can get in on life and be rewarded for their hard work.”

ENDS

For further information, please contact the Conservative Party Press Office on 020 7984 8121.

Notes to Editors

Labour voted against our plans to increase employee share ownership.

• ·         Labour voted against our measures to increase employee share ownership.  At the 2013 Budget, we announced a capital gains tax exemption for employee shareholder shares and extra funding to support employee ownership. Labour MPs, including John McDonnell and Jeremy Corbyn, voted against the Finance Act 2013 at Second Reading (on 15 April 2013) (HMT, Finance Bill Explanatory Notes, link; Hansard,Division 201, 15 April 2013, link).

Labour would break another promise not to raid businesses… again.

• ·         Labour promised not to raise corporation tax for small businesses but their manifesto contained a pledge to hike the small profits rate to 21 per cent. Speaking to the Federation of Small Businesses, Corbyn said ‘When I say any tax rises will fall on the broadest shoulders, I want to make it clear today that we will not raise the small business corporation tax rate’ (Jeremy Corbyn, Speech to FSB, 11 April, 2017, link; Labour press, 10 May 2017, link).

• ·         Labour’s plans would break their own promise to keep corporation tax ‘among the lowest of the major developed economies’. Labour promised to keep Corporation Tax among the lowest but on top of their rise to 26 per cent, the additional contribution would make corporation tax the second highest in the G7 (The Labour Party, Funding Britain’s Future, p.6, link; The Financial Times, 11 September 2018, link; OCED Statistics, Table II.1 Statutory corporate income tax rate, accessed 11 September 2018, link).

Labour’s policy would actually end up harming people.

• ·         Labour’s renationalisation plans would slash existing share ownership with ordinary hardworking people losing out. A third of employees in United Utilities participate in their employee share scheme, as do two thirds of South West Water employees and 70 per cent of Severn Trent’s UK employees. Furthermore, the BT pension scheme owns a significant share (13 per cent) of Thames Water while a conglomerate of Local Government pension schemes hold a 15 per cent share of Anglian water.  Renationalising these industries would place those investments at risk (Social Market Foundation, The cost of nationalising the water industry in England, February 2018, link.).

• ·         John McDonnell has previously suggested Labour could renationalise industries without compensation to shareholders. John McDonnell said that: ‘Parliament will determine whether or not we provide compensation and on what scale’ (Financial Times, 18 February 2018,link).

• ·         Whilst Jeremy Corbyn has criticised employee share ownership as merely ‘sweetening’ the pill for privatisation. Jeremy Corbyn said: ‘The coalition is privatising the postal services as a whole and trying to sweeten the pill with employee share ownerships’ (Morning Star, 12 January 2011, link).

Labour’s plans would hand their union paymasters additional powers.

• ·         Labour’s current plans aren’t about levelling the playing fields it’s about putting the power in the hands of their union paymasters. A report from the far-left New Economic Foundation suggested that unions would have considerable control over ‘a worker controlled fund’ which businesses would contribute towards. The report said: ‘We also recommend a ‘heartbeat’ policy we call an Inclusive Ownership Fund, which would either compel or strongly incentivise (or both) all shareholder- or larger privately-owned businesses to deposit a small, annual share of profits in the form of equity into a worker-controlled fund… and other stakeholders in decision making and, in particular, in determining purpose’ (New Economics Foundation, Co-Operatives Unleashed, p.4, 3 July 2018, link).

• ·         Labour have already made clear their intentions to do the biddings of the unions, with John McDonnell reiterating his support for the Institute for Employment Right’s manifesto calling for a return to ‘secondary picketing’. ‘McDonnell held the Manifesto during his speech and spoke on how the IER's recommendations have helped to shape Labour policy’ (Institute of Employment Rights, 5 June 2018, link).