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Labour’s 7 steps to ‘responsible capitalism’

Ed Miliband Labour Conference 2012 480

Labour leader Ed Miliband now has the first outline of his “responsible capitalism” agenda after a Labour-commissioned report into short-termism in UK business.

Last year Labour hired former Institute of Directors director-general Sir George Cox to develop policy ideas on how to create sustained economic growth.

Cox’s report, Overcoming Short-termism within British Business, calls for an overhaul of the UK tax regime, a shake-up of company reporting standards and radical new rules on buying shares of firms involved in takeovers.

MIliband first described his idea of responsible capitalism at the 2011 Labour annual conference when he divided firms into producers or predators and encouraged long-term thinking in business.

Here are the seven key Cox recommendations that will now inform Labour’s policy review process and its 2015 general election manifesto:

1. Taxation

Capital gains tax should be moved back to a taper system, moving from 50 per cent in the first year to 10 per cent after 10.

Liability for tax on dividends could be reduced, in a series of yearly steps, from the prevailing rate of income tax in year one to 0 per cent after year ten.

2. Small firm finance

Stamp duty for Aim-listed shares should be abolished to boost investment and liquidity in small companies.

Tax on dividends on Aim-listed firms should taper down from the income tax rate to zero in five years instead of 10.

Venture capital trusts and enterprise investment schemes should be boosted. Restrictions on EIS should be lifted to allow large shareholders in firms and employees to invest in them too while VCTs should be enhanced as their impact has been “disappointing” since their creation in 1995.

All financial incentives and support schemes for small firms should be reviewed to establish their effectiveness and impact.

3. Takeovers

Investors who buy shares after a takeover bid has been made should have no voting rights, creating two categories of shareholders for a period.

4. Company reporting

Quarterly accounting should be abandoned so firms don’t have the urgency of facing shareholders every three months with their books laid bare.

Firms must include a clear description of their long-term strategy with progress updates of long-term goals and action taken to pursue them.

5. Executive pay

A large share, say 30 per cent, of an executive director’s pay should be deferred for five years and tied to long-term performance.

Half of non-executive director’s pay should be paid in shares that do not vest until they have left the firm or after five years, whichever is first.

6. Employee shares

Employee share incentive plans should be widened to encourage wider ownership. For example, in addition to £3,000 in shares firms can award they should be allowed to take up 10 per cent of their basic salary of £5,000 whichever is low, subject to the same restrictions and tax benefits.

7. Financial regulation

There must be an urgent investigation into the effects of current financial regulation, especially EU and international, in promoting short-termism.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. John Constable 5th March 2013 at 5:16 pm

    Is anybody still listening to these politicians?

    The so-called ‘deficit deniers’, who added £400Bn to the national debt during their most recent tenure.

    Seems to me that Labour are past masters at irresponsible capitalism (not that the current shower are much better) and it ill-behoves them to preach about this.

    Labour will sit it out, rely on the electorate to have the collective memory of a goldfish, and await buggins turn at Government.

    There has to be a better way.

  2. Step 1, dont vote Labour.

  3. It should read as follows;

    1 Borrow more money

    2 Borrow some more money

    3 Borrow a bit more money

    4 Borrow more money again

    5 Borrow another lump of money

    6 Waste all the money on hair brained schemes

    7 Deny it was anything to do with you when the country goes bankrupt.

  4. The budget deficit was sustainable before bailing out the banks..

  5. John Constable 6th March 2013 at 9:54 am

    Anonymous @ 9:35 am

    You are Ed Balls and I claim my £5.

    The sums are roughly follows:

    Tory inherited debt (1997) = £320Bn
    Labour added debt (1997-2010) = £400Bn
    Bank Bailouts debt = £125Bn
    Interest on all that debt (to 2010) = £25bn

    Total when Coalition took power =£870bn

    Whislt it is true that debt is not a problem per se if the debt can be satisfactorily serviced, it is still a risky business for the borrower because circumstances can change and cannot always be mitigated for.

    In essence that is what happened in 2008 when the roof fell in and Brown, Balls and Miliband found themselves in a bit of a spot.

    Nevermind, they are politicians and simply rewrite history to suit themselves and broadly speaking, the electorate let them get away with it.

    PS. The current shower have continued to spend, spend, spend (money they do not have) so the debt now is around £1.13Tn and still rising.

  6. Most of the 1970′ Labour were in power they left a steaming mess for the Tories to clean up.

    Most of the ‘noughties’ Labour were in power they left a steaming mess for the Tories to clean up.

    Notice the similarity – in future don’t vote Labour.

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