A Positive Policy for Economic Empowerment

The CBI’s reaction to John McDonnell’s employee share ownership plan was to be expected. Not only might such a plan place an initial administrative hinderance on many firms throughout the country, but in the longer term the ability for workers to lever shareholder power over executives shifts the dynamics of executive/employee power.

These are the arguments the CBI could be making – namely, that the plan is disruptive to business. Instead, across the media an almost myopic rebuttal to McDonnell’s plan can be heard. There are claims the plan will reduce productivity, reduce business investment, and drive businesses aboard, ultimately harming jobs. Above all, the CBI claims that such legislation is unnecessary as businesses already give employees the chance to become shareholders.

Partly due to disdain, partly due to inaccuracy, and partly due to the political and economic climate we find ourselves in, these arguments may be dismissed.

Consider productivity. As the Office for National Statistics (ONS) reports, UK productivity since the financial crisis has increased from an indexed value of 95.7 to 100.7. Over the 10 years prior to 2008, productivity increased from 84.9 to the cited 95.7. Of course, these are simply the figures for a problem that has not gone unnoticed: in March, July and August of this year the Financial Times (amongst others) highlighted the UK productivity issue, with a speech by the Bank of England’s chief economist Andrew Haldane on the issue being published in June.

The CBI’s claims that McDonnell’s proposal will harm productivity seems to ignore the elephant in the room, therefore: there is already a productivity problem in the UK. What is interesting, and in many ways encouraging, is that this plan may actually increase productivity, with even the CBI acknowledging that employee ownership often has a positive effect on employee motivation and thus productivity.

Of course, a productivity argument might be made when considering reduced business investment. The argument might go that the burden of this plan will disincentivise businesses to invest, causing productivity gains from new technology will be lost. Unfortunately, business investment since the financial crisis hasn’t changed much either, going from an indexed value of -0.3 in 2008 to 0.2 in 2017 (figures from the ONS). In other words, whilst business investment, or lack thereof, may drive productivity growth, given there has been very little business investment over the past decade it is a dubious argument to attack Labour’s proposal with the threat of further disinvestment.

Though this ignores a wider point. If employees have an ownership stake in businesses, they can encourage and thus counter any disinvestment that it is claimed might occur. Why? Well, following the prevailing theories of investor motivations, those employees/shareholders will want to maximise their return just as all other investors would. This, ultimately, is a more compelling argument than I think is immediately obvious: just because 10% of the company is owned by the employees, it does not mean the remaining 90% of shareholders are going to tolerate disinvestment and the forgoing of profitable endeavours. Presently, executives attempt to maximise shareholder value; they do not care who the shareholders are.

Perhaps, however, the best way to maximise such value is to move abroad and avoid Labour’s proposal. Ignoring the administrative costs of doing such a thing, let us take note of two things. Firstly, as a consequence of Brexit, firms are already leaving this country. For many, the question will be asked what difference will this policy really make? Secondly, this supposed threat of emigration has been raised countless times, be it in opposition to higher corporate taxes, greater sector regulation, increases in wages or trade union bargaining power and so on. Many times, politicians have bought into this threat – implicitly underestimating the value of the UK to these businesses – and have not acted. Now many look around and see the barren, economic desolation that such concessions have brought them. For a great many workers, if the price of keeping these businesses is low corporate taxes, low regulation and weak workers’ rights, low wages and little bargaining power, their desire to appeal to business to stay will be found to be lacking.

For a great many, now is the time to call business’s bluff.

Finally, we must address the claim by the CBI that many firms already allow employees to become shareholders, often by allowing said employees the opportunity to purchase shares at a discounted price. This statement is true, and to be sure it’s generally a positive idea. But it is not fair to bring up such a statement in the context of McDonnell’s proposal.

Whilst those working on the shop floor or the assembly line will be given these share purchase opportunities in their lifetimes, for those who are struggling to pay their rent or struggling to put food on the table because their pay is so low; for those who cannot afford to pay into their pension pot, or perhaps must leave the heating off in the winter; for those people, no matter how good the share offer is objectively, they will never be able to part-take. And even if they did, what power would their voice have versus the vast ownership shares of angel and institutional investors?

For the CBI to dismiss John McDonnell’s plan because similar means of empowering workers already exist, they are either blind to the realities of the everyday worker, or they are intentionally selling a false equivalency.

To be sure, the details of this proposal need to be checked, and checked again. It is foolish to assume all the nuances are known, all the problems are ironed out. But given the arguments offered thus far, primarily by the CBI, this plan remains – in my opinion – a positive policy for economic empowerment.

Why I (Currently) Believe a No-Deal is Unlikely

Theresa May started her premiership with a lie. Or, at least, an implied mistruth. Whilst many debated the content of the statement, “No deal is better than a bad deal,” almost everyone missed the point. Politically, for Theresa May, no-deal is the worst deal.

This is why I believe a no-deal outcome is (currently) unlikely to occur.

Let us step back a moment and unpack this situation, because it does not take much pontificating to realise no-deal is not universally politically bad. In the short-term, such a scenario would satisfy the hard Brexiteers (though I stress in the short-term; in the long-term it is less clear how beneficial no-deal would be to this sect) and may extend political capital. Additionally, if the chaos that is forecast comes to pass, those campaigning for a second referendum will feel validated, if not invigorated. Whilst they might deny this – less they be accused of complacency in this outcome – it is the reality.

The third group to consider are those backing the Prime Minister’s Chequers agreement. By pitching this plan as the last workable option, this group seeks to rally support for the plan. Yet with dissenters on both sides, such a pitch demands we re-evaluate the ground on which we stand: if the Chequer’s agreement is the only deal that can be done, surely the only alternative is a no-deal?

It is the jockeying of hard Brexiteers on the one hand, and advocates of a second referendum on the other, that is propelling this narrative about no-deal. And the media, though rightly evaluating and informing of the consequences of a no-deal, wrongly projects significance onto the meagre odds of such an outcome espoused by those with their own agendas.

Let us remember this Prime Minister’s agenda. Theresa May was a Remainer; I am confident that she desires to be more than just a Brexit Prime Minister. Brexit, in lieu of her legacy, will be an inevitable cornerstone. Yet I see little reason to believe Brexit is all she desires to achieve, and – from the Prime Minister’s perspective – it seems hard to not characterise Brexit as that thing that simply need be achieved before the regular business of governing can begin. No-deal is not an option, because it is almost by definition an admittance of her failure.

This should be obvious. Whilst it is necessary to retain the rhetoric of walking away, the purpose of a negotiation is to reach a negotiated position. Should Theresa May fail to do so, she will have failed in her primary task as Prime Minister, and her remaining in the position will be untenable. Alternatively, consider the reality of a no-deal; a no-deal represents a breakdown in negotiations, not a satisficing of those things which need be negotiated. In other words, sooner or later the UK would have to negotiate with the EU again, over one matter or another. Would this country really entrust a Prime Minister who failed in the primary negotiation to lead secondary or tertiary negotiations?

A no-deal demands Theresa May’s resignation, and if we have learnt anything of Theresa May this past year or more, it is that she is not easily displaced.

I am not sure, either, whether the Conservative party realise the political damage a no-deal would do to them. Whether or not the average Tory voter is inclined to see a no-deal outcome as beneficial, they must surely concede their elected party has failed in its aim. This will be the narrative that dominates the party for the foreseeable future; the failure that calls into question the would-be party of competency.

If there is any entity that I consider more desperate to cling to power than Theresa May, it is perhaps the Conservative party as a whole.

We could play around with a scenario for a moment: that Theresa May, stoic in her resolve, walks away at the eleventh hour claiming such an action was the duty of any good Prime Minister given the villainous proposal on which the EU would not compromise. This, I concede, might score some points in her party. But it would be an obvious change in tone, one that no one would truly believe. It would not mask the sense of failure; it would not protect the party.

I do not deny the possibility of a no-deal, and to do so I think would be foolish. But rather than get caught up in the hysteria of a no-deal apocalypse, let us refocus our attention on the politics of this matter. A no-deal would be disastrous for the Prime Minister, and the Conservative party. Even those who would like to see the former gone will often find themselves exposed to the latter. It is for these reasons I (currently) do not think a no-deal will happen.

An Unacceptable Metric

The current crisis in the National Health Service will persist until rising temperatures and a media exhausted by repetition of the acronym allow the ‘story,’ to disappear. There will be no new money, substantive or otherwise. Nor will there be any bold action, any concessionary or apologetic speeches – anything that might be considered leadership.

The consequence will be repetition. There will be an NHS winter crisis over the 2019 new year. If the system – or the government in charge of it – has not broken by then, the same will be true of the 2020 period. It is a sad truth of politics that when no obvious or easy solutions present themselves, inaction becomes a viable option. Yet inaction creates a vacuum that gets filled with ideas that are dangerous, disruptive or just wrong. Inaction allows the narrative to be hijacked by those with wicked agendas, who will then point to future crises whilst wearing incredulous grins chuckling “I told you so.” In a sense, this is the long-term danger of a lack of leadership with the NHS – that those who talk of privatisation may rear their heads and become validated in the eyes of some.

And thus, we return to the need for leadership. It is opportune that in the same week the NHS was reaching breaking point, the health secretary Jeremy Hunt was proving where his loyalties lie – himself. He is obviously the individual whom blame should most firmly be placed, if for no other reason than his position makes him the figurehead of the organisation. He should be sacked, not because of politics, but because anyone, in any line of work, who was failing in their position so egregiously should be, and would have been, sacked.

Yet the Prime Minister can’t. Indeed, it seems she is incapable of doing much of anything, but staying on point momentarily: her attempts to remove Mr. Hunt from health were scuppered by her own weak position. Justine Greening, formerly of education, had already walked, and Mr. Hunt must surely have been aware that his departure would have threatened Mrs. May’s government. Again, despite politics (and frankly, despite the NHS crisis) when a Prime Minister does not have the authority to appoint, dismiss and rearrange members of their cabinet, we must question their capacities. Of all the things that can be said about the current government, incompetent does not seem wholly fair, whilst cruel implies some conspiracy. Instead, I prefer sycophantic.

But returning to the NHS, what can Mrs. May do? An initial action immediately presents itself – more money. Many critics, including myself, argue that simply throwing more money at the NHS will not solve the underlying problems within the system, and that is true (though money is clearly a large part of any solution). But whilst there is an immediate crisis, concerns for fiscal efficiency must be set aside so that people may be seen, treated and given a bed if required. For those, mostly elderly individuals, who have paid taxes and now call on the medical services of the NHS, it is their right and this government’s obligation to ensure those services are provided and unimpeded.

I understand it is not possible to expand the capacity of our hospitals, or the number of doctors and nurses on the wards, overnight. That is why Mrs. May should move to commandeer the resources of private healthcare providers in the short-term. Such powers are those exclusive to the government, and should be utilised when the situation calls for it. Right now, the situation calls for it, yet such a bold move seems outside the reach of those presently in power.

Finally, and I think most importantly for the long-term, the government needs to understand the pressures facing the health service. Of course, the government will claim it does (amongst other claims), but I offer some tangible actions that might add credence to this quite vapid statement.

Firstly, Theresa May should visit every hospital in the country. She should not visit one or two with a press pack, and talk only to those members of staff who have been photogenically lined up by the reception desk. She should visit every hospital, and field the concerns of every doctor, nurse and patient who wish to speak to her. For Mrs. May, it must not be an act of PR or policy launching, but simple listening and observation.

Second, there should be an inquiry into the cause of the current NHS crisis that places blame and puts forward solutions, so as to prevent the predictions I have made above. Certainly, the heads of hospital trusts should testify, as well as Jeremy Hunt, and the Prime Minister if so required. Only once the social, financial and political causes of the strains in the NHS are understood should further ideas – such as royal commission – be considered. This seems only logical.

Third, we must not ignore the NHS. As eluded to earlier, the coverage in the press plays a huge role in how the health of the health service is understood by the public. Yet if during the summer we ignore the state of the NHS, simply because there are no headline-grabbing stories, should we not expect issues to arise when the winter pressures hit? Indeed, should we not be more aware of the constant pressures facing the NHS? If we only fight for something when there is an existential risk to it, are we not partly to blame when it disappears? 

There are some things the government could be doing right now to solve this problem, but through distraction and weakness they are failing to serve the NHS, and by extension the country. The consequences of doing nothing, in both regards, may be counted in lives lost, and surely that is an unacceptable metric?

Two-year degrees are a short-term fix

The Conservative government pledged in their election manifesto to increase the number of students participating in two-year undergraduate degrees. The up-take thus far has proven disappointing. With explicit benefits touted by the government for would-be students, and implicit benefits more quietly touted for the government itself, the apparent fault for this lack of up-take lies with the universities.

Let’s consider the economics. Completing an undergraduate degree in two years would, in theory, lead to graduates holding less debt than their three-year counterparts. In the face of higher tuition fees, as well as the general increase in the cost of living, reducing the duration of the course seems desirable. Further, the graduate may now enter the job market sooner.

Both reduced debt and earlier work have benefits for the government also, who act as the lender of student finance and collect taxes on earnings. Politically, such an endeavour is also useful, for the nagging issue of tuition fees may be placated by this new, cheaper, alternative. Alternative is also important to recognise; in a market dominated by three and four-year courses, two-year courses offer more choice, which all parties concerned may see as a positive. (I use the word market, and a discussion of choice, dubiously, as we shall see)

Greater choice must certainly be a selling point supported by the universities. If such a course could be packaged to bolster the notion of employment (which, even if false, will inevitably happen), universities will classify this as another positive. Yet, the argument must return to economics, and it is here we find the opposition. For a two-year course to be offered as a cheaper option, the reduced cost must be borne by someone, with the appetite for such a subsidiary not with the government. Two-year degrees would demand universities alter their teaching structure and receive less for the pleasure.

There is an argument that two-year courses would attract more students and increase demand for the universities. Yet such an argument seems dubious; there is already a notion in this country that we have enough graduates – further, even a smaller amount of debt to one’s name may still be viewed as unnecessary debt in the eyes of someone unconvinced university is for them. Two-year courses are not likely to generate sufficient demand.

What they do, however, is alter certain perspectives regarding higher education. Immediately it should be stated, as someone who believes in the abolition of higher education tuition fees, I regard two-year degrees not as a bad thing, but as a half measure. The desire to learn should not be prevented due to monetary barriers. Arguments made by the government in regard to this policy seem to acknowledge this is the state of higher education for some. Indeed, spend any time around a university campus and one will hear such stories, coupled with nihilistic approaches to the debt itself.

The latter statements compliment the point we now return to. The system of higher education in its present form is not sustainable. It is not sustainable due to the burden of debt, certainly, but it is also unsustainable given the growth in online education. If the appeal of two-year degrees is that they are cheaper, then the appeal of an online course (considering only the cost) must be several magnitudes greater. Of course, degrees, it is argued, offer something more. Yet this effect seems diminished as universities continue to promote the employability aspect of their courses, rather than the old adages of expanding one’s mind. At post-graduate level such adages return, but with a slight wink and a healthy dose of employability skills thrown in. Regarding employability, online courses are most certainly a threat.

MOOC companies such as Coursera generate revenue largely through recruitment, with their students having been taught content curated for specific employers. The variety of courses offered by various education sites is also expansive. For the traditional university model, two-year courses do little to compete on either market choice or employability; instead they are a continuity of the current model with benefits that only address internal issues with the current model. They do not consider the changing nature of higher education – the external issues such as MOOCs.

Again, I do not dislike two-year degrees as an idea. I think there are a great many financial benefits for both students and the government, and perhaps even going so far as to change the norm from three to two years would be wise? Yet it feels like a sorry offering at this current time. Never has higher education felt more like an industry; simultaneously, never has an industry felt less innovative. Fees must fall so as to break the stranglehold whilst not disenfranchising those who now dream of going to university. But fees must also fall so that universities may return to teaching students as if they are students, and not economic units.

There will be some that dismiss this as liberal daydreaming, but it is not. Inevitably employers will begin recognising qualifications offered via online education platforms. When that happens, the credential value of an undergraduate degree will be the same of one earnt online, and the most dominantly factor will become cost. Yet universities will never be able to compete on price, and must offer something else in return for the higher mark up. In this regard, student experience has value, and embracing innovation in education is invaluable.

Two-year degrees do neither. By gaming the cost at the expense of other elements, they do not tackle the growing competition. By continuing the current higher education model, they do not embrace innovation. And by regimenting the university process, they reduce the value of other things universities have to offer.

O-turning

The trouble with the Budget is it’s mired in show business - it’s made into a pivotal event. And it is, politically, but not to the extent as the BBC covered it, with a pre-show followed by a four hour long pre- and post- speech analysis which included a tracking aerial shot of Mr. Hammond’s Jaguar as he made his way to parliament. Now, I’m not criticising the BBC, in part because I adore the absurdity of it all. I’m just setting the scene.

Of course, almost as much show business and performance went into the address itself as did go into the coverage of it. A jokey Budget is how many newspapers are describing Mr. Hammond’s hour-long delivery in the Commons. Some will argue it shows confidence and gives the government a much-needed sense of swagger; some that it shows Mr. Hammond fighting for his corner; some will say it shows a government and a Chancellor who is already sinking, so why bother to be bothered about further perceptions?

From my point of view, and what is almost a defence of the Chancellor, though the jokes were awful, when we all know the content of whatever is said will be reduced to a half-dozen bullet points by the commentators covering it, why not give them more cheesy content to sift through? But this, nor the other reasons suggested, are really the reason the Chancellor put on a show.

Though more jovial than most, Mr. Hammond’s tone and turn of phrase was just mimicry of what is seen in that chamber every week, and indeed what was seen immediately before during PMQ’s. Politicians speak in such a way as to embed their real politicking within a defensible question or statement. Many see it as annoying, or sycophantic. Yet that is the reality, and one the Chancellor cannot shy away from.

When he speaks about his decision to, “choose the future,” as if he had a choice, or about his desire for his children to live in a country where people have good jobs, as if this were somehow a new revelation, surely the intention is to paint himself as some political visionary. Yet it says something about the orator, I suggest, when the entirety of a speech’s punch is found in the rhetoric. Indeed, those same words could have come out of Michael Gove’s mouth and they would have had the same impact. In a profession based on candidacy, this is a problem.

Now it is unfair to say this is the exact problem that faces this government, not because it’s untrue, but because such a statement implies this is the only government that is forced to hide behind vapid statements, bluster and stage lights. Indeed, much of Labour’s high and mighty tone invokes such methods. But it is this government, distinguished with a nightmare (bureaucratically and logistically, if not actually) in the form of Brexit on the one hand and a failed yet crucial economic policy on the other that mean it seems to consist almost entirely of empty phrases spoken by interchangeable and frankly forgettable characters.

This is of course the sign of a dying government - one with an obvious lack of vision and too much time spent in office to suddenly decide to find a new one. The fact such a government remains in power demonstrates the priority is not serving, but sustaining.

Brexit remains its own animal, yet the rhetoric spouted by the government of full sail ahead whilst fires break out left right and centre shows they are, somehow, also drowning. A stronger government might be honest with the public that there are challenges in the process, some of which were unforeseen and some which stubbornly persist. Yet this government cannot for fear of upsetting the balance of power and collapsing into civil war.

On the economy, we see a similar story. Seven years into an austerity policy and government debt to GDP (this week’s favourite statistic for citation) will only soon begin to peak. Meanwhile, Andrew Neil of the BBC questioned whether the promise to eliminate the deficit has been abandoned, and Norman Smith (also of the BBC) asked whether Britain just needed to accept we are a poorer country? Yet Mrs. May and Mr. Hammond will continue to refer to Britain’s, “strong economy,” and their party’s economic credentials.

This is the equivalent of closing one’s eyes and putting fingers in one’s ears and shouting, “la la la!” into the aether. A strong government would, at the very least, address these concerns and debate the effectiveness of their choices. Yet for the Conservatives to abandon austerity, they would also have to abandon their legacy of the past seven years. They would have to accept they were consistently wrong, and would have to acknowledge the sense of stagnation (at best) that is gripping the country. They’d self-destruct, shooting themselves with their own silver bullet - economic credibility.

The Budget serves as a fine example of all of this. Immediately after, buoyed by the announcement on stamp duty abolition, the Chancellor may have believed he’d done what many thought was impossible - delivered a good Budget. Yet within hours the maths had been run, and the projection looks an awful lot grimmer and problematic. Mr. Hammond had to U-turn on his previous budget. This is also a sign of weak government, as the Conservatives should most certainly know. But it is much more concerning when a government is so fragile they cannot even risk changing their mind.