UK Government promotes low UK wages: 15 July

2 weeks ago Vince Cable, UK Government Business Secretary, was lauding employee ownership – Nick Clegg, Deputy Prime Minister, said ‘The benefits of employee ownership are clear…. Giving hard-working people a real stake in their company is a hugely underused tool in unlocking growth.’ Vince Cable said ‘As we rebuild the economy, there has never been a more important time to support different ways of running a business.’

Last week Cable announced plans for the future of Royal Mail: The company will be owned by shareholders with only 10% of shares set aside for workers. Somehow, in a week, Cable and Clegg had changed their minds about meaningful employee ownership. Or were they simply saying one thing while ready to do the opposite? Hypocrisy.

Alternatives for Royal Mail exist. Cable and Clegg, before they became part of the Government, promoted selling less that 50% of shares. An Employee Benefit Trust could own most of the shares, a model proved to work elsewhere. Cable last week visited and lauded Arup, a large and successful building engineering company owned by such a Trust.

Royal Mail workers have not been impressed by the 10% sop handed to them. They know that the new owners will consider it their paramount duty to maximise profit for shareholders. This will mean minimising wages. Royal Mail wages will drop to the level of wages in other, minimum wage, delivery companies. Royal Mail workers will have no effective say in this decision, nor in any company decision.

For years the UK has run a low wage, high share value / share dividend economy. Recently we have been keen to benefit from low wages overseas, transferring manufacturing to low wage countries thus preserving share values. Before that we had low wage regions in the UK. After the Second World War, Ford planned to open a factory on the outskirts of Stoke-on-Trent. The owners of the pottery factories lobbied hard against this because they were not prepared to raise wages to compete with Ford. Nor were they prepared to make less profit for themselves. The pottery owners won and Ford went elsewhere. (This history was told me by ordinary people at the local hospice when I worked there.)

At the same time as Ford were losing their bid to pay Stoke workers a better wage, German leaders were working out how to structure their devastated economy. They specifically rejected the low wage, high share value approach, which they called ‘manchesterism.’ They equally rejected a State controlled economy. They consciously followed a middle path, inspired largely by Roman Catholic social teaching, and ultimately by ‘love your neighbour as you love yourself.’ They enshrined in law that the overseeing Board of a German company has to be composed equally of representatives of shareholders and representatives of workers.

Another way of describing the UK low wage, high share value economy is that we prioritise financial services above everything else. If there is a conflict between the interests of the City of London and any other interests, the City wins. Justin Welby, Archbishop of Canterbury wrote that this is precisely the approach which has put us in our economic depression. ‘I believe the jury is now out as to whether, since the reopening of the Eurobond markets by S.G. Warburg & Co. in the early 1960s, financial services have been a net benefit to the U.K. economy as a whole…. financial services must serve society, and not rule it.’
‘The jury is out’ is polite Eton-speak for ‘we know but most people won’t yet admit.’

The contrast with Germany is stark: their companies survive and grow, ours don’t. Our companies, run for the greater good of ‘financial services’, are bled until they either fold or are sold cheaply to foreign companies. Our Government, including our Lib Dem Ministers, have decided to continue and support our low wage, shareholder owned, City-controlled economy. They have not learnt the lessons of the past. There indeed has never been a more important time to support and promote different ways of running a business. Our Government, knowing this, fail to do it. Expect UK wages to fall – thanks to Vince Cable et al.

Roger Harper

One Response to “UK Government promotes low UK wages: 15 July”

  1. Voting for high wages not an option: 6 May | Rogerharper's Blog Says:

    […] Post Office workers who cannot manage on the low wages will need Government support. (See When Labour was in power over many years a Minimum Wage was introduced at a low level but the […]

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