Michael Fallon is a former Defence Secretary, and MP for Sevenoaks.
The first Budget of this Brexit Parliament was a welcome one. In setting out a sensible long-term financial framework to ensure that Britain is fit for the future, the Chancellor pledged additional money for NHS pay, long-term investment in infrastructure and skills, and a beefed-up programme for building more homes.
Long-term investment should be accompanied by deeper reforms. The Government needs to look at how we can be encouraged to save again rather than spend on cheap credit. Quantitative easing has had some pernicious side effects, helping most those who already have assets and keeping us used to unnaturally low borrowing rates.
Capitalism needs more capitalists. The key to our success in the 1980s was to widen ownership: more people bought their own homes, and invested in popular privatisations. One nation means one economy, and more of our people should have a stake in it. Margaret Thatcher believed that it should be as common for people to own shares as it is for them to own cars. The year she left office, eleven million adults held shares. Today, despite a larger population, there are only just over eight million – a quarter fewer. Indeed, three-quarters of households own a car, but only 20 per cent own shares.
The Budget has rightly given a big boost to home ownership. Now we need to look again at share ownership. We know it’s much higher in the United States and in Japan. We know from academic research that companies with employee shares are more productive and more profitable. So let’s see what government can do to give more people the chance to share in their company’s success.
When I privatised Royal Mail, I offered free shares to its 150,000 employees. 99 per cent took them up. We then deliberately skewed the share offer towards small investors. As a result, 20 per cent of Royal Mail is now owned by its staff and small investors. That’s what we should be doing with all our remaining state shareholdings, including the banks and the new social enterprises.
And we should go further. As employee shareholders, people want to sell more and look after their customers – they have a direct vested interest in the performance of their company. That’s how the John Lewis Partnership works so well. But there’s only one John Lewis: we need a thousand of them.
Why aren’t there more? Schemes like ShareSave and Share Incentive Plans aren’t really working: there’s not enough incentive either for employees or for the companies themselves. Companies need to be properly incentivised with a lower tax rate to offer shares free (and free of income tax) to their staff.
So let’s take this opportunity of Brexit to modernise our economy and shift attitudes to saving – encouraging people to invest directly in their own companies, making it worthwhile for the companies themselves, and boosting productivity at the same time. Let’s return to that conservative idea of a capital-owning democracy, where everyone in Britain has more of a stake in our future.