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Osborne Channels Lucy van Pelt

October 11, 2012

At this week’s Tory party conference, the mainstream media got very exercised about Osborne’s plan to give employees in small firms the opportunity to forego their post-employment rights. The reflex collectivist didn’t even bother with “what if” scenarios to see if there was any merit in the idea. They have a public sector mentality of being oblivious to risk (until the system fails catastrophically, see Greece) and a pay freeze is the same as a pay cut. For those of us in the private sector, a pay cut is very much a pay cut. But to a Distributist, employees having shares in the company they work for is prima facie exactly what all popes since Leo XIII’s encyclical Rerum Novarum have supported.

Whether an employee should take shares in the firm they work for depends on their personal circumstances, but there are many scenarios where it would be very advantageous. For example, UK statutory redundancy amounts to one week’s pay for every year’s service after two years’ employment (it flexes a bit depending on the age of the employee). What’s more redundancy is not a secured claim in the event of bankruptcy, it ranks behind the taxman and is in the pool of unsecured creditors (I know because I worked for a firm that went into liquidation and I got nada). The UK average weekly wage for someone who has worked 10-19 years is £705, which would be worth £7,050-£13,395 gross or (assuming tax and national insurance are charged at the lower rate) £4,794-£9,108 net. That’s what an employee would give up in exchange for shares. What are the shares worth? It depends on how many shares they have and how profitable the company is. Say a company has net earnings after tax of £200,000 and the employee has 1% of the company. Then in nominal terms, the employee is entitled to £2,000 per year, of which 50-70% will be paid as a dividend, say £1,120 after tax at 20%. So for the first two years, when there is no statutory redundancy, the employee could be £2,240 better off. What’s more 10-19 years of dividends would be worth £11,200-£91,080, much better than redundancy payments. Plus there is the prospect of an untaxed capital gain which could be very valuable.

The opprobrium heaped on his attempt to extend the much-praised “John Lewis economy” ensures that labour will continue to lead a hand-to-mouth existence without the opportunity to save enough capital to be a cushion against misfortune or a stake in the capitalism. Perhaps Osborne would have had a better reception for his idea if he had credited Chesterbelloc instead of Adrian Beecroft, the man who brought us “Wonga”

The silence on some of Osborne’s other proposals was surprising. Particularly his claim that 80% of the deficit reduction would come from lower government spending, including £10 billion off the welfare bill. Osborne rightly pointed out that employees are overtaxed and taxing them further is not going to help. His mantra was for “fairness and enterprise”, which seemed quite old fashioned, given that those words are synonyms for low taxes on the rich. However, it seems to have permeated all but the thickest of skulls, i.e. Labour and Lib Dems, that taxes under the Brown terror had reached immoral proportions.

He rightly pointed out that it was unjust that young women who have never worked but have managed to share a mattress with fertile paramours get a flat, when those who have retained a semblance of sexual morality and a work ethic still live with their parents. It’s too bad it’s taken the Tories 50 years to see the stark staring obvious. I knew it for the lunacy it is when I was 13 and learned all about “survival of the fittest”.

There was more catnip for small-c conservatives too. For example, he conceded the “drip, drip, drip of powers to Europe”; that public sector pensions are unaffordable; that no household should earn more from benefits than the average family earns in work; and that education reform is necessary. Bitter experience tells me that when it comes to the physical acts of making the necessary changes, we will be sadly disappointed. He may have recovered the chairs before he rearranged them, but it’s too little too late. The Tories have promised reforms before on all the above and on unfettered immigration, even giving cast-iron guarantees. Yet we know that they will whip the ball away, and we will fall flat on our backs, again. I don’t believe a word he said.

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From → Chapter 1

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