Sign our call for government to scrap tax breaks for executive shareholders and invest in worker ownership.
Co-ops need to hold the government to account on the Prime Minister's Inclusive Economy agenda. As part of this we've made a submission ahead of Budget 2017, telling the Chancellor that if he wants to create a genuinely inclusive economy, he should stop awarding £220 million a year in tax breaks to just 40,000 high earners, and spend the money helping more workers own and control their livelihoods through co-ops.
This is a long-term goal and we're asking our members to sign up in support of this call so we can speak as a collective voice in the run up to Budget Day on 8 March.
Through two schemes, Company Share Option Plans (CSOPs) and Enterprise Management Incentive (EMI), government awards significant tax breaks to people exercising share options as part of their elite remuneration packages. Firms using CSOP and EMI tend to limit these share options to a select group of usually very senior employees.
In Autumn Statement 2016 the Chancellor announced the abolition of another scheme, Employee Shareholder Status (ESS), on the grounds that it was being used for tax planning by high-earners. He was right to do so but we think the same logic should now be applied to CSOP and EMI.
"Company Share Option Plans and Enterprise Management Incentive schemes are massive tax subsidies for those who are already likely to be well rewarded for the work that they do. It is bizarre that in a time of supposed austerity there's still money available for welfare for the well off. There are vastly better uses for this money, including providing direct support to new businesses and co-ops when they're first getting going, which is the time they really need it." Tax expert, Professor Richard Murphy of City University of London
By digging into HMRC data Co-operatives UK has found that in 2013-14, the last year for which data is publicly available, the Exchequer gave away £220 million in tax breaks through CSOP and EMI to just 40,000 people. Furthermore in 2013-14 the average tax break awarded through EMI was £15,400 per employee, more than the annual income of someone working 35 hours week for minimum wage.
We do not think CSOP and EMI spend scarce public money in ways that contribute to a more inclusive economy - if anything they do the opposite.
There are better ways to create an Inclusive Economy that are more productive for more people, including models that can do more to benefit workers on low and middle incomes. Co-operatives offer a means by which workers can own and control their livelihoods. This model does not rely on tax-advantaged shareholdings but rather on supporting new forms of entrepreneurship, rooted in local needs and capacities and underpinned by a combination of pragmatism, solidarity and enterprise.
In our Budget 2017 submission we recommend that government reallocate spending in the following ways:
- Invest the £115 million it expects to save through the abolition of ESS in a Co-operative Entrepreneurs Programme, specifically designed to help entrepreneurial people on low and middle incomes own and control their own livelihoods through co-operatives
- Abolish CSOP and EMI and reinvest the hundreds of millions saved each year in an Employee Buyout Investment Fund
- Commit to monitoring the ‘inclusivity impact’ of other tax schemes, to ensure they continue making a strong positive contribution to a more Inclusive Economy, with a particular focus on the benefits for low and middle income workers
Co-operatives offer a means by which workers can own and control their livelihoods. This model does not rely on tax-advantaged shareholdings but rather on supporting new forms of entrepreneurship rooted in local needs and capacities
Reallocating public funds in this way would spread ownership, save jobs, boost productivity, create opportunity, lower inequality and enhance social capital in places across the UK, just as any policy for a genuinely Inclusive Economy surely must.
Add your voice
This is a long-term goal and we're asking our members sign up in support of this call to make ourselves heard in the run up to Budget Day (8 March).
If you have any questions or comments please contact our Policy Officer.