Shares For Rights Flops

Jan 10 2014, 1:45pm CST | by

Shares For Rights Flops

It must have seemed like a good idea at the time. George Osborne, Britain’s Chancellor of the Exchequer, naturally wants to be seen as a supporter of entrepreneurs and employees alike. It was therefore logical enough to give pride of place in last March’s Budget to his Shares for Rights scheme, which is supposed to deliver valuable benefits to both these constituencies. The problem is that almost no-one seems to be interested – and now some of Osborne’s most prominent colleagues in the Government want the scheme scrapped.

Under Shares for Rights, owners of small businesses are able to dispense with some of the regulation built into Britain’s labour market legislation, which some entrepreneurs have criticised as too onerous. The idea is that they offer to grant employees shares in their businesses worth between £2,000 and £50,000 – staff who take up the offer have to waive protections such as the right to sue for unfair dismissal, to claim statutory redundancy pay and to request flexible working.

The Government also offered a sweetener to persuade employees to consider the free shares – any profits they make on such stocks are not subject to capital gains tax.

The scheme was formally declared open in September. Government data on take-up is almost non-existent, but it seems fair to say that Treasury officials haven’t exactly been rushed off their feet. In December, civil servants conceded they had received precisely 19 expressions of interest from businesses considering taking part, though they point out that entrepreneurs do not have to give notice of their intention.

Nick Clegg, the Deputy Prime Minister – and leader of the Conservatives’ Liberal Democrat coalition partner – is certainly unimpressed. This week he called for the scheme to be scrapped, with the savings put towards more generous tax breaks for lowly paid workers.

It’s not just low take-up that has dogged the scheme. The Office of Budget Responsibility, the independent body set up by the Government to scrutinise the UK’s public finances, warned it could be used as a tax dodge that might cost the Treasury as much as £1bn a year.

Criticism has also come from those concerned about employees’ labour rights. Lord O’Donnell, the former head of the civil service, has described the scheme as a form of modern slavery.

It’s worth pointing out that employers can’t require their staff to take the free shares on offer – the deal has to be acceptable to both sides. This may be one reason why adoption rates have been so miserable. From an employee’s point of view, shares in a start-up business, which may or may not succeed, may have less value than long-cherished employment rights (or no value at all if the business fails). The tax-free offer has an element of the pot of gold at the end of the rainbow – a tax saving on purely theoretical profits on some distant day in the future isn’t much of a draw.

As for employers, it may be that they’re far less concerned about rights such as statutory redundancy pay and flexible working than the Chancellor imagines. After all, few entrepreneurs who start businesses list these issues at the top of their lists of anxieties – they have simply got bigger fish to fry.

All in all, Shares for Rights has been a pretty dismal failure. The only good news for the Chancellor is that there’s no need for an embarrassingly public u-turn – take-up has been so pitiful that it will be possible to kill off the scheme without anyone noticing. On the downside, the savings Mr Clegg is looking forward to aren’t going to amount to very much.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Young heart can heal itself faster
Washington, Oct 31 (IANS) The heart holds its own pool of immune cells capable of helping it to heal after injury, finds research, adding that the harmful immune cells from the bone marrow disrupts this process in adults.
 
 
Hubble captures 'ghost light' from dead galaxies
Washington, Oct 31 (IANS) NASA's Hubble telescope has picked up the faint, ghostly glow of stars ejected from ancient galaxies that were gravitationally ripped apart several billion years ago.
 
 
How to chequemate your creditor (The Funny Side)
Cheques are dying out, a report says. This is a tragic loss of an ancient Asian invention - so I learned from the new Museum of Accountancy in India. That country invented that form of promissory note way back in the Mauryan period (321 to 185 BC), when Westerners were still evolving from jelly-like invertebrates in warm ponds.
 
 
Jailed reporter's family urges Iran to release him
Tehran, Oct 31 (IANS/EFE) The family of Washington Post's Iranian-American reporter Jason Rezaian, held without charges in Iran for more than 100 days, has called on Tehran to set him free.
 
 
 

Latest from the Network

Young heart can heal itself faster
Washington, Oct 31 (IANS) The heart holds its own pool of immune cells capable of helping it to heal after injury, finds research, adding that the harmful immune cells from the bone marrow disrupts this process in...
Read more on Business Balla
 
German kidnapped in Nigeria rescued
Lagos, Oct 31 (IANS) A German national, who was abducted a week ago in Nigeria, has been "rescued", authorities confirmed. Ogun state police spokesperson Abimbola Oyeyemi said the hostage was "rescued" Thursday and...
Read more on Politics Balla
 
Somalia's police chief is dead
Mogadishu, Oct 31 (IANS) Somalia's Police Commissioner General Mohamed Sheikh Hassan Ismail has died, officials said. A probe has been ordered into his death. The official unexpectedly fell and died in the course of...
Read more on Politics Balla
 
Hubble captures 'ghost light' from dead galaxies
Washington, Oct 31 (IANS) NASA's Hubble telescope has picked up the faint, ghostly glow of stars ejected from ancient galaxies that were gravitationally ripped apart several billion years ago. By observing the light...
Read more on Business Balla
 
Jamaican discus thrower banned for two years
Monaco, Oct 31 (IANS/CMC) Jamaican discus thrower Traves Smikle has been suspended for two years for using a banned substance, the International Association of Athletics Federations (IAAF) announced. IAAF Thursday...
Read more on Sport Balla
 
How to chequemate your creditor (The Funny Side)
Cheques are dying out, a report says. This is a tragic loss of an ancient Asian invention - so I learned from the new Museum of Accountancy in India. That country invented that form of promissory note way back in the...
Read more on Business Balla
 
110 Mexican women pose nude for US photographer
San Miguel de Allende (Mexico), Oct 31 (IANS/EFE) As many as 110 women posed nude as a group here for US photographer Spencer Tunick, who conducted a photo shoot with the theme of Mexico's Day of the Dead. With just a...
Read more on Celebrity Balla
 
Gibson appointed England bowling coach on temporary basis
London, Oct 31 (IANS/CMC) Former West Indies head coach Ottis Gibson has been appointed as a bowling coach for England on a temporary basis. Gibson will participate in a fast-bowling performance camp in South Africa...
Read more on Sport Balla
 
Roberts wants WICB to prioritise salvaging ties with BCCI
St. John's (Antigua), Oct 31 (IANS/CMC) Former West Indies fast bowler Andy Roberts said he is not in agreement with the decision by the West Indies Cricket Board (WICB) to first setup a task force to probe the...
Read more on Sport Balla
 
Nigeria to reinstate Keshi as national team coach
Abuja, Oct 31 (IANS) Nigerian authorities have decided to reinstate Stephen Keshi, coach of the senior national football team, who was relieved of his job exactly two weeks ago by the football federation. Toyin...
Read more on Sport Balla