Monday, October 08, 2012

Osbornomics - answering questions that have not been asked

With today's announcement that employees will be able to sign away their employment rights in return for a handful of shares, Osborne continues his record of economic illiteracy, providing ineffectual supply-side answers to demand-side problems. More than that, he's also created a tax break for the 'high worth' employees.

Employees will be able to surrender their rights to claim unfair dismissal, redundancy, the right to claim flexible working, the right to training and will also have to provide 16 weeks notice of a return to work after maternity leave rather than the current 8. Companies get to choose whether they offer this contract and, while it is aimed at small startups, it can be used by companies of any size.

This originates in the Beecroft Report - although report seems to be a generous term for a document entirely devoid of evidence or references and largely consists of a wish list from venture capitalists about how to further take advantage of their workforce. Nowhere is there any evidence that any of these changes will boost the economy. In fact, we already have the second weakest protections for employees of any comparable country - Germany is far tougher and has not suffered the same level of economic collapse that we have.

As I have said repeatedly, in my experience of recruitment over some fifteen years, I have never had employment rights raised as an obstacle to hiring a new employee. The main question you should ask is if there is a business case for recruitment and that is almost entirely based around demand.

What Osborne has done is to make Beecroft sufficiently palatable for Cable to swallow chunks of it - but Osborne has also written in a tax break for his mates. So, we will have the 'plebs' being offered £2,000 worth of shares - in return for a job which has significantly reduced security, while top level employees get an instant golden handshake of £50k in shares which will be exempt from capital gains tax.

This is not aimed at creating a stable economy, but increasing instability for the lower-end workforce - the very people whose spending helps sustain our domestic economy.

George - the problem isn't with regulatory issues holding the economy back. It is a lack of demand.


kodzos said...

Well said sir. This is a terrible ill thought-out proposal. Regardless of the value of your shares, if you work for an SME, whose shares are not traded on an open market, there is no way to accurately value the shares or anyway to realise the value of them via sale. In the end whether you are getting £2k or £50k you are giving up employment rights for something that you cannot sell and therefore are worthless.

Anonymous said...

This proposal scares me more than many I have seen coming out of this Government. I do hope people don't fall for any soft sell on this, some could lose far more than they realise....