Workers as shareholders (1986)

From the December 1986 issue of the Socialist Standard

In preparation for the next general election the Tory Party is popularising the idea of worker-shareholders as part of that party's long-held vote-catching conception of a "property-owning democracy". From the earliest days of capitalism the rich and governments have always urged the workers to work hard, be loyal to their employers, live prudently, save money and never get into debt. The advice also included warning them to put the money in a safe place such as the Trustee Savings Banks or. in 1861. in the newly established Post Office Savings Bank. The one thing they were advised not to do was to enter the risky field of company shares.

But times change and the advice also. Every inducement is now given to getting into debt by buying on credit. Working hard and being loyal to the employer remain, but nowadays this calls for more sophisticated methods. At all times the motives behind the advice have been the same. Workers who followed the advice would, it was thought, be better profit-producers for their employers, would be less likely to fall into destitution and become a burden on the rates.

In the middle of the nineteenth century few workers were able to save anything. British capitalism was booming but the wages of most workers were at bare subsistence level. Only skilled workers could put anything by. But it was only out of their own resources that any workers could make provision for sickness, unemployment and old age, or the cost of funerals. What provision some workers could make was through membership of the Friendly Societies and trade unions. (This and other information will be found in Paul Johnson's Savings and Spending: The Working Class Economy in Britain 1870-1939).

As Paul Johnson says, few workers even troubled about what they would live on in old age because they did not expect to live long enough Only the trade unions had provision for unemployment but as late as 1911 Lloyd George reckoned that not even ten per cent of the working class were covered for it. As the trade unions grew in membership and effectiveness, in the second half of the century. wages steadily increased and savings also. Between 1870 and 1914 the number of depositors in the Post Office Savings Bank and Trustee Savings Banks grew from 2,500,000 to 11,000,000. Yet in 1911 it was reckoned that the total assets of adult workers were only £11.10p a head — just enough to cover two months' unemployment or sickness.

Since 1945 conditions have altered in various ways. The purchasing power of workers' take home pay (after deductions of PAYE and NI contributions) has continued to increase and is now well above the level of 1938. Workers' savings have grown but the ownership of accumulated wealth of all kinds remains highly unequal. The Royal Commission on the Distribution of Wealth and Income, in its report in 1975, found that the top twenty per cent of adult population owned seventy-eight per cent of the wealth and the bottom eighty per cent of the population only twenty-two per cent of the wealth. One new factor has been the payment of £10,000 million redundancy pay to workers who have lost their jobs, producing the somewhat novel feature of unemployed workers having, for a time, cash at their disposal. It is against this background that the Tory Government launched its programme for a property-owning democracy. This included a change in the law enabling council house tenants to buy their houses at prices below the market rate. The Tory Election Manifesto 1983 said. "There are a million more owner-occupiers today than four years ago".

Other items in the Tory programme have been encouragement to companies to introduce "profit sharing" to their workers and schemes to increase the buying of shares by workers. In the "privatisation" of British Telecom and other nationalised industries shares have been issued at prices below market rates, with preference to employees to buy shares. The result has been that those who acquired shares saw an immediate big rise in their stock-exchange price. According to the British Market Research Bureau the proportion of individual shareholders among the adult population has more than doubled in the past two years, to about 16 per cent. The British Telecom share issue is reported to have attracted about a million investors who had never owned shares before, including a large proportion of the firm's employees.

The latest government scheme (still in its discussion stage) aims to encourage companies to make agreements with their workers to have part of their wages related to the ups and downs of profits. Instead of an agreed wage of. say, £10,000 a year (£192 a week) there might be a basic rate of £8,000 (£154) plus a share in profit. In an average year the profit share would be £38 which, with the basic £154. would give £192 as before. If profits rose, the total would be above £192 but in a bad year the worker would receive only the basic £154. The inducement to the worker would be that some part (half has been suggested) of the profit element of pay would be exempt from PAYE deduction, worth about £5 a week to a worker on average pay.

The advantage to the employer would be that the workers would have an interest in co-operating to produce maximum profits and avoid strikes, and would make it easier for the employer to adjust costs in times of bad trade. Instead of having to try to reduce wages, the fall in total payments to the workers would be automatic, in the terms of the agreement. However the supposed effect of the scheme to which the government attaches most importance is that it would, in the governments view, encourage employers to take on more workers and thus reduce unemployment, instead of having to pay £192 a week to additional workers the employers' commitment would be only the basic rate. £154. Only if profits again increased would the employer have to pay more than that.

The scheme has received a very mixed reception. The Confederation of British Industry is lukewarm about it and the largest employers' organisation, the Engineering Employers' Federation, is hostile. The Federation doubts whether it would change the workers' attitude towards their employers and whether it would have any effect in reducing unemployment. Among the objections raised to the scheme by employers is that the unions would counter any fall in the profit-related part of wages simply by claiming an increase of the basic rate and that the workers would resist the employment of additional workers because it would mean sharing the profits among a larger number, reducing the amount going to each worker. In spite of the objections, present indications are that the government will go on with the scheme.

The TUC is sceptical and the attitude of the Labour Party is not yet known. But about worker shareholders the Deputy Leader of the Labour Party. Roy Hattersley, has come out in favour. "The extension of employee shareholding . . .  is wholly consistent with the aims of socialism. It is also in the interests of the economic success and social cohesion of the country" (Observer 16 March 1986). Whether or not the government really believes that their various schemes for a property owning democracy will make any difference to the way capitalism operates, it is certain that they will feature prominently at the next general election, in confrontation with the Labour Party's attempts to revive the lagging popularity of nationalisation by giving it the new name "Social Ownership"

The Labour Party will claim that, in selling the nationalised industries to raise revenue and to make possible a reduction of income tax, the Tories have been guilty of a profligate misuse of "public property". The Tories will retort that a Labour government, with its plans for a vast increase of government expenditure, will have to raise income tax drastically and that employee share ownership “is the truest public ownership of all" (Tory Election Programme 1983).

The Tories will make the most of the Labour Party's declared intention of government action about the shareholders in British Telecom. At present the holders of shares in British Telecom and other privatised industries are seeing a big increase in the stock exchange price of their shares. A Labour government will offer to these shareholders the option of selling the shares to the corporation only at the lower price paid for them, or of having Consumer Bonds which will not carry voting rights.

Of course, by the time the election comes round the stock exchange price of British Telecom and British Gas shares (under the impact of increased competition) may have fallen below the present price. But if the stock exchange prices keep up to the present high level, the Tories will represent the Labour Party's taking over of the shares as an act of "robbery of the workers' savings".

The Tories will not have forgotten what happened at the general election in 1931. The Labour government had collapsed, with the Labour Prime Minister. J. R. MacDonald and his Chancellor of the Exchequer. Philip Snowden, joining a National government with the Tories and Liberals. The Labour Party lost heavily in votes and seats and political commentators said that a major factor in their defeat was a broadcast by Snowden asserting that if a Labour government were elected it intended to "rob the Post Office Savings Bank" in which the workers had their savings.

Edgar Hardcastle