Despite an important annoucement for co-ops a week ago, we didn't get the inclusive economy Budget we were looking for.
Some important spending commitments were presented as measures for ‘an economy that works for everyone’, such as investment in skills, free childcare and a further £2 billion for social care. But for those who think the distribution of power in the economy matters, this was pretty underwhelming.
Tax breaks for executives still preferred to worker ownership
We know there is a growing desire in this country to reimagine work and wealth creation, so that these deliver better outcomes for more people. And we think government could be far more supportive of this without having to break the bank. Especially when we see the Exchequer give huge tax breaks to executive shareholders.
In January Co-operatives UK made a formal Budget Submission calling on the Chancellor to scrap £220 million a year tax breaks for executive shareholders and reinvest the funds in worker ownership. In the run up to Budget Day our call was backed by more than 180 co-ops and individuals, including the UK’s leading worker co-ops. We made this call on the back of some inspiring new developments in worker ownership across the UK and the success of The Hive, our business support programme dedicated to co-ops.
We didn't get a formal response to our submission. And the tax breaks for executive shareholders are still in place. In fact in the small print it says government is seeking EU State Aid approval to extend one of the offending reliefs, Enterprise Management Incentive, beyond 2018.
This is disheartening but we won't give up. We expect to make a similar representation ahead of the Autumn Budget.
If we do want a genuinely inclusive economy that works for everyone, government must stop spending scarce millions sweetening the pay deals of higher earners, and use the money to support new forms of work and wealth creation instead.
Less support for community investment
When people in a community pool their money to meet local needs they demonstrate the power and potential of co-operative action to make life better. Community land trusts are a great example of this, where people use their collective power to own land and so control the cost of housing in their area. Community buyouts of local assets like pubs are another great example. A community-owned pub recently won a top national award.
Until recently it was hoped that an expanded Social Investment Tax Relief would provide useful new incentives for people to use their money in these ways. Unfortunately the Budget contained confirmation that government will no longer allow Social Investment Tax Relief to be used by social ventures where asset leasing and on-lending form a significant part of the business plan. This means government is withdrawing support for investments where land and assets will ultimately be owned and controlled by the community, but where the day to day is undertaken by a third party, such as a housing association or tenant pub manager.
When government first proposed these changes in the Autumn Statement we were asked by community investment experts to join in opposing them. So we made a submission to the Finance Bill warning that these measures would limit the utility of Social Investment Tax Relief for community investment, at a time when people need all the help they can get to make local economies work to them. Sadly we were ignored.
Given that the activities excluded from Social Investment Tax Relief are increasingly the same as those for the venture capital-orientated Enterprise Investment Scheme, some are now questioning its utility altogether. These latest changes certainly reduce the potential for Social Investment Tax Relief to support a broadening of community ownership and control in the economy.
You can find all the official Budget documentation here.
Lobbying success for co-ops
We were delighted that government used the Budget to announce an improvement to the legal framework for co-operative and community benefit societies, which will save some of them between £5,000 and £10,000 a year in extra audit fees. Co-operatives UK has lobbied for this for two years. Read more on this significant policy win here.
However, while this is a really positive policy to support a more inclusive economy, it is not really a Budget measure as such.