Labour's employee ownership plan will be seen as theft

There is the kernel of a good idea in John McDonnell's proposals to make any business employing more than 250 people to hand 10% of the company to their staff.
It is that it would widen share ownership. Wider share ownership is an unalloyed good thing.However, for many businesses, the shadow chancellor's proposals amount to little more than a confiscation of other people's property.Say you are an entrepreneur.You had a good idea for a business, you remortgaged your home to raise capital to set up the business when the bank wouldn't lend to you, you worked long hours into the night and the weekends, making heavy personal sacrifices, foregoing holidays, the kids birthday parties and other social events.
Labour's employee ownership plan will be seen as theft

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There were weeks, even months, where you couldn't afford to pay yourself a proper salary. Your business is a success and you are able to take people on, provide them with jobs.You take the business onto the stock market and see a value attached to your life's work. Then, at the end of all that, Mr McDonnell wants you to hand over 10% of everything for which you have worked to an "Inclusive Ownership Fund" (IOF) without you receiving any compensation.It is hard to think of an idea better designed to kill entrepreneurship stone dead or to drive wealth creators, the people who take risks to build successful businesses and create jobs overseas.How would you like it if you were obliged to hand a 10% stake of your home, or your car, to someone else without compensation? That is how many entrepreneurs will feel about being made to give up a stake in their business without compensation.Ah, you may say, but what is wrong with a big, faceless FTSE-100 company, a Royal Dutch Shell or an HSBC, being obliged to deposit 10% of their shares in such a fund?The answer is because this would still represent confiscation by the state of other people's property.All of these companies are owned by their shareholders, in the main, members of occupational pension schemes and holders of insurance policies. These companies belong to them and, if you take away 10% of them and give it to someone else without compensation, that amounts to theft.Even if companies issue new shares to deposit into this IOF, existing shareholders would still see their stake in the business diluted, which amounts to the same thing.Worse still, many of the big battalions of the FTSE 100 or the FTSE 250 now have a significant proportion of shareholders on their register from overseas.Again, it is harder to think of a policy better constructed to drive away foreign investors from the UK.Many City investors are currently battling to stop Unilever, the third biggest company in the Footsie, relocating its head office to the Netherlands because the move will result in it being ejected from the index.
Labour's employee ownership plan will be seen as theft

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That would force some investors to sell their shares in Unilever without receiving any kind of takeover premium. A lot more companies would contemplate similar actions if these scheme comes to pass.Think how you would feel if, for example, you had bought shares in one of America's tech titans, like Apple or Amazon, only for the US government to confiscate 10% of your shares?Or if you had invested in one of Germany's prestigious companies, like BMW or Adidas, only for the German government to insist 10% of your shares were given up without compensation. You would think twice about ever investing a penny in America or Germany again. Post-Brexit, the UK needs desperately to attract foreign investors, not risk repelling them.Then there's the way Mr McDonnell proposes to cream off some of the dividends paid by the shares in this IOF once every worker has received their €500-a-head entitlement from the pot. That looks very much like a backdoor increase in corporation tax.There's also the question of who would sit on the board of trustees of this Inclusive Ownership Fund or how powerful they would be to stop a future government from dipping into the fund to divert money from it to pet projects or to plug budget deficits.
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