Osborne's "employee-owner" plan is Beecroft through the back-door

Remember "fire-at-will"? It's back! In co-op form!

George Osborne's plans for an "employee-owner" scheme, announced today, may sound familiar to people who care about employee protections. That's because we've heard much of it before, when it was announced by Tory donor and venture capitalist Adrian Beecroft.

The plan is described by the Treasury as a "new type of contract":

Employees will be given between £2,000 and £50,000 of shares that are exempt from capital gains tax. In exchange, they will give up their UK rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training, and will be required provide 16 weeks’ notice of a firm date of return from maternity leave, instead of the usual 8.

Crucially, while the status is optional "for existing employees", any company can chose to offer only that type of contract for new hires.

In other words, for the princely sum of £2,000 of equity, companies can completely and permanently buy out their employee's protections again unfair dismissal and redundancy, and their rights to flexible working and time off for training, as well as severely curtailing their maternity leave flexibility.

The last time we heard changes to employment law of this magnitude was the publication of the Beecroft report, the raft of employment law reforms suggested in May this year. The report, when published (ahead of schedule, due to leaks), was ridiculed for the complete lack of evidence to support its assertions. Clive Hollick, the co-founder of IPPR, wrote that Beecroft had told him his recommendations were "hearsay", based only on what he had been told, while Helen Lewis spotted that "the words “I” or “my” appear 20 times in 16 pages, while the words “research” or “studies” don’t feature at all."

Shortly after, many of the proposals suggested by Beecroft were implemented by Vince Cable – but not, notably, the fire-at-will provisions, which were blocked by the Liberal Democrats, with Cable saying he was opposed to the "ideological zealots who want to encourage British firms to fire at will".

Five months on, and the proposal is back on the cards. But this time, the government wants the public to think that employers aren't getting something for nothing. Whereas a switch to everyone's employment rights looks rather nasty, a negotiated switch between employers and employees is much fairer. And being paid £2,000 for your rights looks like a downright good deal.

Except it's not. Even if the £2,000 was in cash, upfront, and negotiable, it would still be a comparatively small amount (it is, for instance, less than four week's wage at the median full-time salary, although it stretches further due to its tax-free nature). And the provisions contain a number of measures which make it even more preferable for employers, and less for employees.

The minimum value of the shares required to be given is £2,000, but there is a nasty hidden in that. The Treasury writes:

The Government consultation on the owner-employee contract will include the details of restrictions on forfeiture provisions to ensure that if an owner-employee leaves or is dismissed, the company is not able simply to take the shares back but is able to buy them back at a reasonable price.

The £2,000 in shares the employee holds may be bought back "at a reasonable price" if the company decides to dismiss them. For non-listed companies (precisely the "fast growing small and medium sized companies" at which the initiative is aimed), this price will be extremely hard to determine. And if an employee thinks they've been short-changed, their only option is to take their employer to court; always tricky for someone without a job, and trickier still if the Government's plan to introduce fees for employment tribunals goes ahead.

The new rules are an attempt to introduce Beecroft back in through the back door. For £2k, you will be expected to sell your rights. No wonder Beecroft wrote:

This is a creative and exciting version of proposals that I made in my report.

There is, though, one last twist to the story. Dan Davies, of Crooked Timber, has been tweeting about the other implication of offering up to £50,000 shares tax free: if you're thinking of starting up a private firm, it could let you get away with not paying much tax at all.

The founders of a company rarely need much employee protection; and since they are also the ones who choose how much the shares are "worth", it might be extremely easy to end up owning large proportions of a new company with permanent tax-free status. A similar dodge was used by Mitt Romney; his retirement savings, which could only accept $450,000 in nominal shares during his years at Bain Capital, are now worth over $21m. When you say how much a company is worth, limits don't count for much.

Osborne's crafted a plan which, at a stroke, gives employers the ability to dodge tax on their companies, while dodging the responsibilities they have for towards their employees. It's almost impressive. 

The Old Street roundabout, an area full of tech startups hoping to benefit from Osborne's scheme. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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Ken Livingstone says publicly what many are saying privately: tomorrow belongs to John McDonnell

The Shadow Chancellor has emerged as a frontrunner should another Labour leadership election happen. 

“It would be John.” Ken Livingstone, one of Jeremy Corbyn’s most vocal allies in the media, has said publicly what many are saying privately: if something does happen to Corbyn, or should he choose to step down, place your bets on John McDonnell. Livingstone, speaking to Russia Today, said that if Corbyn were "pushed under a bus", John McDonnell, the shadow chancellor, would be the preferred candidate to replace him.

Even among the Labour leader’s allies, speculation is rife as to if the Islington North MP will lead the party into the 2020 election. Corbyn would be 71 in 2020 – the oldest candidate for Prime Minister since Clement Attlee lost the 1955 election aged 72.

While Corbyn is said to be enjoying the role at present, he still resents the intrusion of much of the press and dislikes many of the duties of the party leader. McDonnell, however, has impressed even some critics with his increasingly polished TV performances and has wowed a few sceptical donors. One big donor, who was thinking of pulling their money, confided that a one-on-one chat with the shadow chancellor had left them feeling much happier than a similar chat with Ed Miliband.

The issue of the succession is widely discussed on the left. For many, having waited decades to achieve a position of power, pinning their hopes on the health of one man would be unforgivably foolish. One historically-minded trade union official points out that Hugh Gaitskell, at 56, and John Smith, at 55, were 10 and 11 years younger than Corbyn when they died. In 1994, the right was ready and had two natural successors in the shape of Tony Blair and Gordon Brown in place. In 1963, the right was unprepared and lost the leadership to Harold Wilson, from the party's centre. "If something happens, or he just decides to call it a day, [we have to make sure] it will be '94 not '63," they observed.

While McDonnell is just two years younger than Corbyn, his closest ally in politics and a close personal friend, he is seen by some as considerably more vigorous. His increasingly frequent outings on television have seen him emerge as one of the most adept media performers from the Labour left, and he has won internal plaudits for his recent tussles with George Osborne over the tax bill.

The left’s hopes of securing a non-Corbyn candidate on the ballot have been boosted in recent weeks. The parliamentary Labour party’s successful attempt to boot Steve Rotheram off the party’s ruling NEC, while superficially a victory for the party’s Corbynsceptics, revealed that the numbers are still there for a candidate of the left to make the ballot. 30 MPs voted to keep Rotheram in place, with many MPs from the left of the party, including McDonnell, Corbyn, Diane Abbott and John Trickett, abstaining.

The ballot threshold has risen due to a little-noticed rule change, agreed over the summer, to give members of the European Parliament equal rights with members of the Westminster Parliament. However, Labour’s MEPs are more leftwing, on the whole, than the party in Westminster . In addition, party members vote on the order that Labour MEPs appear on the party list, increasing (or decreasing) their chances of being re-elected, making them more likely to be susceptible to an organised campaign to secure a place for a leftwinger on the ballot.

That makes it – in the views of many key players – incredibly likely that the necessary 51 nominations to secure a place on the ballot are well within reach for the left, particularly if by-election selections in Ogmore, where the sitting MP, is standing down to run for the Welsh Assembly, and Sheffield Brightside, where Harry Harpham has died, return candidates from the party’s left.

McDonnell’s rivals on the left of the party are believed to have fallen short for one reason or another. Clive Lewis, who many party activists believe could provide Corbynism without the historical baggage of the man himself, is unlikely to be able to secure the nominations necessary to make the ballot.

Any left candidate’s route to the ballot paper runs through the 2015 intake, who are on the whole more leftwing than their predecessors. But Lewis has alienated many of his potential allies, with his antics in the 2015 intake’s WhatsApp group a sore point for many. “He has brought too much politics into it,” complained one MP who is also on the left of the party. (The group is usually used for blowing off steam and arranging social events.)

Lisa Nandy, who is from the soft left rather than the left of the party, is widely believed to be in the running also, despite her ruling out any leadership ambitions in a recent interview with the New Statesman.However, she would represent a break from the Corbynite approach, albeit a more leftwing one than Dan Jarvis or Hilary Benn.

Local party chairs in no doubt that the shadow chancellor is profiling should another leadership election arise. One constituency chair noted to the New Statesman that: “you could tell who was going for it [last time], because they were desperate to speak [at events]”. Tom Watson, Caroline Flint, Chuka Umunna, Yvette Cooper, Andy Burnham and Liz Kendall all visited local parties across the country in preparation for their election bids in 2015.

Now, speaking to local party activists, four names are mentioned more than any other: Dan Jarvis, currently on the backbenches, but in whom the hopes – and the donations – of many who are disillusioned by the current leadership are invested, Gloria De Piero, who is touring the country as part of the party’s voter registration drive, her close ally Jon Ashworth, and John McDonnell.

Another close ally of Corbyn and McDonnell, who worked closely on the leadership election, is in no doubt that the shadow chancellor is gearing up for a run should the need arise.  “You remember when that nice Mr Watson went touring the country? Well, pay attention to John’s movements.”

As for his chances of success, McDonnell may well be even more popular among members than Corbyn himself. He is regularly at or near the top of LabourList's shadow cabinet rankings, and is frequently praised by members. Should he be able to secure the nominations to get on the ballot, an even bigger victory than that secured by Corbyn in September is not out of the question.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.