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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Forget planning for no deal. The government isn't really planning for Brexit at all

The British government is simply not in a position to handle life after the EU.

No deal is better than a bad deal? That phrase has essentially vanished from Theresa May’s lips since the loss of her parliamentary majority in June, but it lives on in the minds of her boosters in the commentariat and the most committed parts of the Brexit press. In fact, they have a new meme: criticising the civil service and ministers who backed a Remain vote for “not preparing” for a no deal Brexit.

Leaving without a deal would mean, among other things, dropping out of the Open Skies agreement which allows British aeroplanes to fly to the United States and European Union. It would lead very quickly to food shortages and also mean that radioactive isotopes, used among other things for cancer treatment, wouldn’t be able to cross into the UK anymore. “Planning for no deal” actually means “making a deal”.  (Where the Brexit elite may have a point is that the consequences of no deal are sufficiently disruptive on both sides that the British government shouldn’t  worry too much about the two-year time frame set out in Article 50, as both sides have too big an incentive to always agree to extra time. I don’t think this is likely for political reasons but there is a good economic case for it.)

For the most part, you can’t really plan for no deal. There are however some things the government could prepare for. They could, for instance, start hiring additional staff for customs checks and investing in a bigger IT system to be able to handle the increased volume of work that would need to take place at the British border. It would need to begin issuing compulsory purchases to build new customs posts at ports, particularly along the 300-mile stretch of the Irish border – where Northern Ireland, outside the European Union, would immediately have a hard border with the Republic of Ireland, which would remain inside the bloc. But as Newsnight’s Christopher Cook details, the government is doing none of these things.

Now, in a way, you might say that this is a good decision on the government’s part. Frankly, these measures would only be about as useful as doing your seatbelt up before driving off the Grand Canyon. Buying up land and properties along the Irish border has the potential to cause political headaches that neither the British nor Irish governments need. However, as Cook notes, much of the government’s negotiating strategy seems to be based around convincing the EU27 that the United Kingdom might actually walk away without a deal, so not making even these inadequate plans makes a mockery of their own strategy. 

But the frothing about preparing for “no deal” ignores a far bigger problem: the government isn’t really preparing for any deal, and certainly not the one envisaged in May’s Lancaster House speech, where she set out the terms of Britain’s Brexit negotiations, or in her letter to the EU27 triggering Article 50. Just to reiterate: the government’s proposal is that the United Kingdom will leave both the single market and the customs union. Its regulations will no longer be set or enforced by the European Court of Justice or related bodies.

That means that, when Britain leaves the EU, it will need, at a minimum: to beef up the number of staff, the quality of its computer systems and the amount of physical space given over to customs checks and other assorted border work. It will need to hire its own food and standards inspectors to travel the globe checking the quality of products exported to the United Kingdom. It will need to increase the size of its own regulatory bodies.

The Foreign Office is doing some good and important work on preparing Britain’s re-entry into the World Trade Organisation as a nation with its own set of tariffs. But across the government, the level of preparation is simply not where it should be.

And all that’s assuming that May gets exactly what she wants. It’s not that the government isn’t preparing for no deal, or isn’t preparing for a bad deal. It can’t even be said to be preparing for what it believes is a great deal. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.