Discontent with the current status quo across the political and economic environments has been rising for some time and nowhere was it more evident than in the result of the EU referendum. The vote to leave was very telling about the divisions that exist in British society; divisions that are underpinned by a blending of the political, social and economic. While most people were off enjoying last weekend, I was in Cardiff attending the Co-operative Party’s annual conference. Even among political colleagues I’ve had it put to me ‘but how boring’, ‘mutualisation – wishy washy’. For the record I had a great time and, fortunately for me, this is one area of my life where my personal interests collide with the professional.
I think the idea of mutualisation is one of the best kept secrets around and with increasing pressure to do things differently – a redressing of the balance of the burdens borne by different sections of society and increased focus on corporate governance – there appears to be a gap in the market that could be filled by the mutual model of economic ownership.
This is the first in a two part series looking at some of the pressures that have been building in financial services, reaching a crescendo of voices calling for change. The second piece, which follows on from this, will look at the potential for increasing the number and role of mutual organisations in society.
The Brexit result was, for many people, devastating. Like others, particularly those working in financial services, I believed that staying in the EU was important for a number of reasons including jobs, businesses and investment. When the result came it wasn’t just a telling off, but a massive slap in the face: a rejection of the status quo and frustration with politics and politicians. People were angry and they wanted ‘to take back control’. Was this really about Europe? As someone who campaigned extensively during the referendum campaign, I’d say not. This was about quality of life, pressure on public services and immigration, among other factors. There was a sense of too much interference in people’s lives by ‘people over there’, who they didn’t know and couldn’t hold to account.
The leaking of the Panama papers earlier this year shone a spotlight on the lengths that some will go to, in order, to minimise the tax they pay. The details showed how widespread the practice is across geographies and how even the most senior members of society were implicated, including the then Prime Minister David Cameron. While those engaging in offshore schemes may not have technically done anything illegal, moral questions were raised – not about whether those who can pay more should pay more but whether or not those people are even contributing their fair share. Large corporations have also found themselves under pressure to pay tax in jurisdictions, which legally they may not have had to, but again moral arguments about contributing to a society from which it has made a significant profit has thrown companies like Google into the spotlight.
All this is set against a backdrop of cuts to public expenditure, which evidence suggests has not been borne fairly across all socio-demographic groups. The House of Commons Treasury Select Committee has been lobbying the Treasury, over the last year, to reintroduce distributional analysis to draw out the impact of polices on household incomes. Add to this the negative attention over BHS and Tata Steel over who should cover the pension deficit and the questionable governance practices at Sports Direct, the time is ripe for reform and the politicians don’t seem set to disappoint.
Only two weeks in to September, we’ve already seen HMRC launch the Worldwide Disclosure Facility, an opportunity for individuals to come forward and declare UK tax liabilities related to any offshore funds before the rules are tightened in 2018. Chris Philp, Conservative MP and member of the Treasury Select Committee, has published a paper with the High Pay Centre, in which he focuses on high executive pay and ‘ownerless corporations’ and advocates a series of reforms including a shareholders committee (he’ll be discussing this in an interview with MRM shortly). The Business, Innovation and Skills Committee has just launched an inquiry into corporate governance and we know that the Government will be introducing a Criminal Finances Bill, which will include measures to take legal action against companies who do not step in to prevent staff from contributing to tax evasion. While over in Europe, German finance minister Wolfgang Schaeuble has renewed calls for a financial transaction tax, previously rejected, to ensure that banks pay their fair share. Given the current climate, the chances of progressing this particular policy might be somewhat greater now than before (particularly with the voice of Britain weakened post-Brexit).
The culture is shifting towards one in which both individuals and corporations take more responsibility for their actions and contribution to society. With the spotlight on improving corporate governance and ensuring that individuals and corporations pay their ‘fair share’, it seems an opportune time to consider alternative solutions to wholly state- or private- owned enterprises. In the next part, I elaborate on how and why mutual models might help to fix the widening cracks in how we do business.