Last week I made a bold claim. I forecast that 2017 would be the year when the UK government announces new policy initiatives encouraging the development of employee profit sharing schemes and wider employee share ownership.
This week I expand on why I think change is coming. Next week I explain what form that change will take.
Being Theresa May (or should that be Ed Miliband?)
Theresa May has pitched the idea of the ‘shared society’ which was essentially a repeat of her speech on the steps of Downing Street when she became PM.
It is still too early to divine what ‘shared society’ means in a concrete policy sense but it should be possible to extrapolate some raw themes.
Under Theresa May I think we can expect to see the government place greater emphasis on the following messages:
- overcoming intergenerational division and inequality
- encouraging individuals to take greater responsibility
- emphasising the bonds of citizenship and community
- respecting fairness
There is a degree of irony here. When Ed Miliband articulated near identical themes at party conference he was ridiculed in some sections of the press for being ‘anti-market’ and defiantly socialist. I also seem to recall that David Cameron came in for similar criticism with his ‘Big Society‘. How times don’t really change even if the people at the top sometimes do.
So on the assumption that ‘shared society’ is a case of old wine in new bottles regardless of political affinity, let’s look at what vintage Theresa May could be serving up.
Household debt is at record levels and a comfortable retirement seems out of reach for most. Quantitative easing has raised asset prices (which is good if you own houses, stocks and shares etc.) and undermined the viability of final salary pension schemes (deficits have widened as rising asset prices have depressed bond yields).
The BBC recently provided a good overview of the generational challenges.
Theresa May is on record lamenting the effect that low Bank of England interest rates is having on savers. It is not a stretch to believe that the PM instinctively favours the Victorian virtues of thrift, sacrifice and self-determination.
The introduction of lifetime individual savings accounts (LISAs) is bang on trend and will herald new and different ways to save.
We have seen a transformation in the workplace where the new pension freedom rules mean that a workplace pension is fast becoming a workplace savings scheme. Creating a stronger savings culture is and remains high up on the government’s agenda.
Moreover, responsibility for getting people to save more has shifted to employers. Auto-enrolment and the legal requirement for employers to contribute to pension schemes is the start of a long-term policy shift.
Inequality and productivity
Theresa May has said that: “when it comes to opportunity, we won’t entrench the advantages of the fortunate few, we will do everything we can to help anybody, whatever your background, to go as far as your talents will take you.”
Separately, OECD research has shown that high levels of inequality can impact productivity growth negatively by causing a lack of investment in human capital. Crudely, if the reallocation of resources is too severe or narrow, this could mean that less investment is made in employees e.g. training is scaled back, rendering those employees less productive.
It is well known that that the Chancellor of the Exchequer Philip Hammond has pledged to tackle the UK’s productivity gap.
Citizenship and community
Most vague but also most interesting was Theresa May’s desire to strengthen the bonds of community and citizenship through collective responsibility.
One early example of how collective responsibility could work in practice is considered in the Green Paper on Corporate Governance Reform which argues that consideration of wider stakeholder interests benefits both companies and society as a whole.
Another example is the growing trend for companies to become employee-owned, and recent legislative changes have made this model more attractive. Employee-owned companies almost by definition tend to reward collective rather than individual effort, encouraging better democratic accountability (and therefore responsibility) through staff forums and engagement.
Next week I will examine collective responsibility further in the context of profit sharing and employee share ownership.