Recent Articles

Sunday, 14 October 2012

Tories propose you give up your Employment Rights in exchange for a bunch of shares - a repeat of the Manhattan Scam?

Apart from doing that Bullingdon thing the Chancellor George Osborne also studied Modern History at Oxford University. Some may be surprised to learn that "Modern" history starts from the 16th Century straight after the Middle Ages. One of the lessons Osborne would have learned from this period is how the island of Manhattan in New York was given up by its Native American Indian inhabitants for a handful of glass beads. Clearly an example of how one party misled the other on two things:

a)     the relative values of a handful of glass beads and Manhattan, and
b)     the implications of "give up"

George is trying the same trick with your Employment Rights. He proposes that you surrender your right to claim unfair dismissal in exchange for shares in your employer worth between £2,000 and £50,000. This is in spite of the fact that Britons are already the third most easily sacked people in the developed world. 

Presumably the idea is that you too can get richer from your own sacking by the boost to your employer’s share price and the dividends that come from getting rid of you. Making getting fired worthwhile!

As you will appreciate, this is closely modelled on the Manhattan Island scam. So we provide you with some basic facts to avoid any confusion on

a)     the relative value of a handful of shares and your employment rights, and
b)     the implications of “give up”

In March 2012, the Chartered Institute of Personnel and Development published a report titled “Counting the cost of the jobs recession”. The report provides stark figures on the effect on the economy of unemployment.  


The report's figures on the continuing lost GDP, e.g. 9.1% lost in 2011 alone, throws a light on the fact that although the banks may claim to have stopped stabbing us in the back (though we doubt this), and claim to be reforming (we doubt this too), it is clear that we are still bleeding. It also provides other grim facts for the sacked:
  • The number of people working part-time because they can’t find a full-time job doubled from 0.67 million to 1.34 million between spring 2008 and the end of 2011.
  • Two-thirds of people who are made redundant and who then return to work are paid less in their new job. On average, the pay penalty is 28%.
An earlier CIPD report, from January 2009, “A False Economy? The cost to employers of redundancy”, found that in terms of the amount of redundancy money paid:
  • The average redundancy payment is found to be £10,575, though a quarter of employers pay less than £5,000. The average payment ranges from £7,629 in the voluntary/not-for-profit sector to £8,891 in the private sector and £17, 926 in the public sector.
So on a middling salary of £2,000 per month, assuming you can get a new job you are likely to be paid £560 per month less (the average pay reduction of 28%). Without a new job you would be on nothing but benefits of a few hundred pounds and falling as the benefits axe continues to cut.

The Chancellor suggests between £2,000 and £50,000 of shares in return for your employment rights. Private sector companies are unlikely to hand their staff shares worth more than the average redundancy payment of £8,891. But lets say they feel generous, and offer £9,000 worth of shares. How much income would that bring you each month, assuming you hold on to the shares to benefit from your own sacking?

This becomes clear from a snapshot, taken in October 2012, of the dividends paid by FTSE100 companies. The graph, showing the monthly income if you took the annual dividend in 12 instalments, reveals how paltry this would be:
  • Just one company would pay more than £50 per month in dividends
  • Three more companies would pay more than £20 per month
  • Fourteen more companies would pay more than £10 per month
  • Forty nine companies would pay less than £2 per month

File:Golf clubs.jpgIf you were worried that the Tories are unthinkingly legislating Britain into a medieval world of cornucopic plenty for some and abject poverty for many, with the poor forced to supplement their meagre livings with a bit of thieving, you’d be quite wrong. As well as promises to slash benefits, salaries, pensions and employment rights, the Tories promised to legalise beating up burglars to a disproportionate but not grossly disproportionate degree

When asked by the BBC what would not be allowed, the Justice Secretary Chris Grayling said that stabbing an unconscious burglar was not allowed. Will the Tories be promoting a bag of golf-like clubs for this purpose? Allowing you to select a club to inflict a disproportionate but not grossly disproportionate beating?

And shall the courts have a ‘swing weight’ chart to judge the line between disproportionate and grossly disproportionate? One weight for adults, another for children, with a discount for the degree of burglar incapacitation?
http://www.golf-components.com/swing-weight-chart-woods.html
The October 2012 Tory Party Conference was specific on determined cuts to benefits, but totally vague on "the rich paying their fair share". We wonder whether the Tory leadership is deeply cynical, or just grossly ignorant about the real world. With both the PM and Chancellor's life experience limited to Eton, Oxford, and Tory politics (Cameron's stint in PR for a television company counting as 'Tory politics') - never having had a real job, nor ever having to worry about paying the next electricity bill - perhaps they really believe by adding a few shares to ones portfolio one can get by. No doubt they don't need their salaries, being well provided for by dividends, capital growth, and other unearned income. 

When the US presidential candidate Mitt Romney brought ridicule on himself by suggesting the average income in the USA is a quarter of a million dollars, it seems that he wasn't being cynical but really believed this. Could it be that Tory politicians really believe that making the rich even richer benefits everyone? And losing a few thousand pounds a month income doesn't really matter? Cameron's great-great grandfather made a fortune trading grain, and Osborne's father proved successful selling wallpaper. Do the Prime Minister and Chancellor, who are able to live on income they have not earned, not understand the tribulations of those who depend on their jobs for their livings?

This also raises a question about another non-Tory leader, Nick Clegg of the Liberal Democrats. With fixed term parliaments now law David Cameron can no longer decide when to dissolve Parliament (a tactic repeatedly used by previous prime ministers to time elections to their best advantage). Has Nick realised he is now, by withdrawing his support for the coalition, one of only two people who can force an early general election? The other is HM Queen Elizabeth. 

Poor Nick was caught between the Scylla of Gordon Brown and the Charybdis of David Cameron. One a known bully, the other a probable bully. At that time Clegg had no option but to sail into coalition - to do otherwise would have been cowardice. Was Clegg's entering into the coalition government with Cameron a brilliant strategic masterstroke giving him this near unique (shared only with the Queen) parliament-ending power? Or is he going down in history as the fall guy he appears to be, taking his party into the fall with him? Will the real Nick Clegg now step up?

5 comments:

  1. Samuel Wheeler15 October 2012 20:43

    Point of information: Modern History at Oxford (in the sense of the course) is distinct from Ancient History. It begins with the reign of Diocletian. I studied Modern History and Politics and covered the Fall of Rome in my first year.

    "Students may choose from seven options, divided according to historical period (roughly from the 4th century to modern day). This is an outline paper, with a wide chronological span of British history, and introduces students to broad developments within the period. "
    http://www.history.ox.ac.uk/prospective/undergraduate.html

    ReplyDelete
    Replies
    1. Crumbs!

      Thanks for the clarification.

      Delete
  2. "Lords reject George Osborne's plan for employees to sign away their legal rights in return for receiving shares in their companies"...
    http://www.independent.co.uk/news/uk/politics/lords-reject-george-osbornes-plan-for-employees-to-sign-away-their-legal-rights-in-return-for-receiving-shares-in-their-companies-8543115.html

    The former Tory Cabinet minister Lord Forsyth of Drumlean, one of several senior Conservatives to criticise the plans, described the idea as “ill-thought through, confused and muddled... I am astonished the Coalition would even think of bringing forward such a measure.”

    The Government will now have to decide whether to overturn this Lords defeat in the Commons.

    ReplyDelete
  3. As they probably will....

    ReplyDelete
    Replies
    1. As they did. This law will come into effect in Sept 2013. http://www.legislation.gov.uk/ukpga/2013/27/pdfs/ukpga_20130027_en.pdf

      Delete