The Treasury has launched a consultation on £50m worth of tax breaks for employee-owned companies as part of the coalition’s effort to boost the number of John Lewis-style businesses.
Its proposals came under fire from some critics, however, on the grounds that they could disproportionately benefit the John Lewis Partnership, Britain’s largest employee-owned company.
The government is promoting the growth of employee-owned companies, co-operatives and mutuals amid evidence that many companies owned by their workers have proved more resilient since the economic downturn.
Interest in more diverse forms of company ownership is growing despite the problems that have beset the banking arm of the Co-operative Group, the UK’s largest mutual.
The Treasury is consulting on two tax breaks, including capital gains tax relief when a controlling stake in a business is sold to employees through a collective structure such as a John Lewis-style trust.
The second would allow employee-owned companies to pay staff an annual bonus free of income tax and national insurance.
The moves – which came on the UK’s first “employee ownership day” – follow the Nuttall review in 2012, which said employee-owned companies brought benefits including faster job creation, resilience and increased commitment from staff. In the Budget the chancellor set aside £50m from 2014 to fund staff ownership initiatives.
But some observers questioned whether the second tax break would give too much benefit to the John Lewis Partnership, which pays an annual staff bonus.
“It could be counterproductive if JLP which least needs taxpayer support, gains most. Need to spread the benefits?” said Ed Mayo, secretary-general of Co-operatives UK, a trade body, on Twitter.
The Employee Ownership Association aims to raise the employee-owned sector from £30bn of annual gross domestic product to £100bn, or 10 per cent of GDP, by 2020.
The UK has 150 companies with significant employee ownership, including the John Lewis Partnership, and the EOA says the number grew by 10 per cent last year.
The Cabinet Office has released research suggesting that nurses, social workers and council staff who had formed mutuals had expanded their businesses by an average of 5 per cent each year since 2010.
The UK now has 70 public services mutuals delivering more than £1bn of public services annually. The study by Boston Consulting Group found that those created after January 2010 had increased the number of contracts they delivered by 29 per cent.
It also said they had higher staff engagement and morale, with absenteeism falling by an average of 20 per cent and staff turnover falling by 16 per cent.
Francis Maude, minister for the Cabinet Office, said public service mutuals were raising the bar for competition, winning contracts and creating jobs.
Danny Alexander, Treasury chief secretary, said: “The employee ownership sector has huge potential and the government wants to support it as much as possible. Employee ownership is of significant benefit to the wider economy, through increased growth and business success and this business model will also add greater diversity to our economy.”
At an employee ownership conference in London, Vince Cable, business secretary, announced the publication of joint government and industry-led guidance to help businesses move to the employee ownership model.
At events around the country, more than 100 employee-owned companies from builders to dentists and home care workers opened their doors to showcase the benefits of their business model.
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