In light of the paradise papers, it is clear that the rich are still not paying their fair share in society. With influential political figures, like Lord Ashcroft, celebrities and, most embarrassingly, the Queen being caught out.
But with Brexit round the corner opinions could become increasingly polarised on tax avoidance. Do we need to hammer companies for every penny of tax money, or do we continue to let them drain our public services because we are afraid they will leave for foreign shores? But we need to look left to stop capital flight, not give handouts to the richest in society.
Even if we forget the task of narrowing our £120 billion tax gap there are serious and legitimate fears about capital flight post Brexit. The prospect of the UK leaving the Single Market, having to erect tariffs, impose customs checks and lose all the freedoms of being in the single market could drive capital flight. There are serious worries about headquarters, factories, but most of all jobs heading overseas, especially in the automotive industry and financial sector.
Despite the majority of Brits viewing bankers in a negative light after their misdealing in the run up to the financial crash, Britain’s economy does need its financial services. There are over one million jobs in the finance sector, 3% of our labour force, and it contributes £24 billion in tax receipts in the form of corporation and income tax to the treasury. Financial services are 7.1% of our GDP. We might not like it but we need the banks.
However, with Brexit, and perhaps a no deal situation, many banks have talked about moving to Frankfurt, Dublin and other new European locations. 12 banks are moving some operations to Dublin due to Brexit whilst according to a report gained by the Guardian ‘several’ banks will move slowly across to Frankfurt, losing the UK 9,000 jobs.
The story is similar in many more industries. Automotive companies like Nissan have had to reach ‘special’ tax deals with the government to guarantee not moving their factories; yet more corporate welfare. But can you blame them? Investment in the UK automotive industry has been reduced by 50%. Nearly 1 Million people are employed in jobs around the automotive sector.It’s another vital sector.
Both sectors are highly at risk due to Brexit, and both employ huge numbers of highly skilled British workers that we simply cannot afford to lose. And to not lose jobs to Europe, we must must look to Europe for ideas.
The solution lies on the Left, in co-determination. Whether it’s labelled as workers controls, syndicalism or co-partnership the trick to stopping capital flight is to let the workers have their say. Getting workers to make decisions on the board of directors will stop capital flight.
Co-determination allows worker representation on the board of directors. It is a policy that Theresa May flirted with early in her premiership stating “we’re going to have not just consumers represented on company boards, but workers as well”. Though she has recently backed out of the policy that has worked very well on the continent.
Worker’s representatives for boards are selected via union democracy. Different nations have different ways of how it functions. In France, Sweden and Denmark workers have the right to elect a certain percentage of the company board. Between 1/3 and a half 1/2. However Germany and Austria have a binary board system. One for owners, and one for workers. This system functions like the bicameral legislative, where both boards must agree. The law requires firms to have an executive board, composed by executives and chaired by the CEO, and a supervisory board, composed by non-executives, employee representatives (including union representatives).
Co-determination in Germany is regulated by the Codetermination Act 1976 and all companies with a workforce of over 2000 employees must comply with these regulations.
The hardcore Libertarian would claim that it would hurt economic growth. Yet the EU countries with these policies have growth vastly superior to our own. Germany has twice the foretasted growth for 2017 than the UK. All the countries mentioned who have co-determination have greater wage growth and GDP growth currently. Germany has manged to become the economic powerhouse of Europe with the policy. It will not create economic weaknesses in the long term, and it will offer huge short term economic benefits.
This could be legislation that Corbyn and the Labour Party champion should they get into government. It could be a good way for them to drive Union donations, as it could give Unions more power than they currently have. The Corbynista Labour party, with it’s socialist heart, would see this is an example of the opportunities created by Brexit, who many of their most left wing MPs are in favour of.
Outsourcing could soon become a thing of the past should the UK adopt a binary board system of co-determination, re-bringing strength to our manufacturing sector and maintaining our vital tertiary industries. And, significantly, stopping the flight of companies overseas due to Brexit.