Did UK bosses bring about Brexit? - Forward Thinking

Actions always speak louder than words. With some notable exceptions, including Tim Martin (Weatherspoons), Lord Bamford (JCB) and Sir James Dyson to name a few, UK bosses of industry and commerce warned of the negative outcomes of the Brexit decision. Yet Forward Thinking suggests their unchecked actions and policies directly contributed to the vote in favour of Brexit.

There has been much post-Brexit analysis of the geography, voter education and every other aspect of voting behaviour. Behind it all, the inescapable truth is the policies implemented by the bosses (and tacitly supported or at least made easy by a lack of politicians’ intervention) contributed heavily to the result. 75% of politicians favoured remaining in the EU, yet had failed to protect the workers from the excesses of the free market.

We live in a capitalist society, where the notion of regulation is openly opposed by bosses. Politicians meekly accept their stance. The free market is rampantly allowed to determine business behaviour. Regulation is selectively reserved for only the extreme examples of potential exploitation. Often ineffective (and sometimes powerless) regulators are seen as a last resort. The free market, where the bosses decide policy leaves employees and consumers at the mercy of decisions made by the few, to benefit the few. Yet the referendum made each vote equal (what a contrast to a general election) and the many consumers had a vote as powerful as those in the boardroom.

Most companies operate to produce profit, so there is a natural tendency to reduce costs where possible. They avoid tax if possible and hire staff (as well as making other purchases) at the lowest possible cost, quality not withstanding. The corporate avoidance of tax is an international issue, which has attracted much media attention in 2016. Politicians have proved ineffective at preventing tax avoidance on an industrial scale. Contrast this with the limitation of workers to manipulate taxation because they are subject to the PAYE system.

Corporate decisions to price a product at a certain level benefit the few through profits but affect all consumers by taking their disposable income. Now of course pricing decisions also fund corporate investment, and therefore indirectly the ability to offer employment. At the same time corporate investments are increasingly directed to automation, with the incentive of increasing profits, but not necessarily employment. So far, it can be argued that automation has not directly affected employment levels, but has changed the nature of jobs. This will not hold true as the digital revolution moves forward. It is in its absolute infancy.

Changes to our tax and benefits are needed to cope with that digital revolution.

Now opponents to my argument will cite the current employment levels. The highest number of jobs ever, and the ‘low levels of unemployment’. Dig deeper into these statistics and a different story emerges. Look as the damning Joseph Rowntree Foundation report in December 2016:

One in every eight workers in the UK – 3.8 million people – is now living in poverty. A total of 7.4 million people, including 2.6 million children, are in poverty despite being in a working family. This means that a record high of 55 per cent of people in poverty are in working households.

So who decides that pay level? Would it, in part, be the bosses of Britain’s largest public companies who earned an average of £5.5 million in 2015, and enjoyed a 10% pay rise in that year? Now if the minimum wage had kept pace with the pay increases of those bosses since 1999 the minimum wage would now be £20.70 each hour! Instead workers have gained a rise to £7.20 in 2016 and the comparable level with the £20.70 was just £6.70 in 2015! There was much noise when the previous Chancellor announced this ‘huge’ growth in the minimum wage for 2016 of 7.5%, yet the top bosses managed 10% already in 2015 alone. Is there no understanding of the building resentment?

Even working 40 hours a week, 52 weeks a year that still only gives an increase of £1040 a year for the minimum wage employee, yet the growth for the bosses was worth £412,500. Now it takes the minimum wage employee 27.5 years of full-time work just to earn only the one year growth in pay of these bosses. These are excessive inequalities, and they are not lost on people with an ability to cast a vote on an equal footing.

Of course assuming full-time work is also a misnomer. According to the Department for Business, Energy & Industrial Strategy (BEIS) there are 903,000 people whose main job was on a zero hours contracts in 2016. That is 3% of the workforce. In the survey undertaken in the same period of 2015 the number was 747,000. So there was 21% growth. That is far more than the average increase in employment. This is an insecurity of employment that has far reaching outcomes. Rents, mortgages, heating and food bills simply do not reflect these potential irregularities in payment and the prospect of credit to smooth the payment is equally elusive.

At least those working on part-time contracts have fixed hours. They can plan and budget accordingly.

Then there is the part of the population forced into a position of self-employment. Now of course for some, self-employment is a lifestyle choice, but only where it is a voluntary decision not one where people are forced to accept it. According to the most recent 2016 Labour Force Survey, there are 4.773 million self-employed in the UK, a growth of 25% since the same period in 2008. This is a much larger proportional rise than the number of employees which increased by less than 5%. Clearly the difference cannot by explained only by a huge boom in entrepreneurial endeavours.

It is difficult to collect reliable income data on the self-employed. Their earnings are often complex. Distribution of self-employed earnings is varied. However, the Family Resources Survey shows the reported gross annual earnings of the self-employed in constant prices. It shows a clear fall in the median earnings from self-employment. Earnings from employment have also fallen over the same period, but by much less; while earnings from self-employment fell by more than 25%, earnings from employment fell by 11% (data only between 2008 and 2014).

So either this boom in entrepreneurial ability is failing, or lower income groups are being coerced into self-employment. An Ipsos Mori survey in 2014 for the Resolution Foundation identified that 28% of people self-employed would prefer to be in employment. This does not sound like the great entrepreneurial revolution inferred.

So we have a toxic combination of work with no security and pay that holds people in poverty. It all sounds like a Dickensian description of Victorian Britain. There are of course two huge differences.

  1. In Victorian Britain the votes were restricted to propertied males. The interests of those with capital were easily protected at the ballot box
  2. Victorian Britain was at the infancy of industrial scale globalisation that now leads to even further distortions in equality. It provides high-profile exploitation of tax avoidance by corporates and high-wealth individuals leading to further feelings of injustice and inequality.

That growing globalisation has resulted in greater levels of immigration, amplified by the EU’s free movement fundamental. Now of course economics is fundamentally linked to supply and demand. The more supply, the lower the price. So the plentiful supply of staff inevitably reduces wages, especially if there is a potential supply of labour from lower cost countries. Immigration for skills shortages (partly a result of the inadequacies of our education system but also a lack of corporate investment in training), is one factor, but it also has the capacity to suppress wages.

Now there are large variations in opinions about the impact of immigration on wage suppression, debated at length by politicians. It is a far shorter debate among low earners or those without employment. Of course to the employer the debate is immaterial, the plentiful supply of a low cost raw material is the important issue. It just happens to be people’s lives.

Inequality will always prevail in a capitalist society, there is an understanding that different skills command different rewards. However, the excesses of the inequality are dangerous when everyone is given an equal say. Media developments have transformed people’s knowledge and access to information. Far more people have access to stories of corporate and personal greed, examples of exploitation, tax avoidance and other corporate misbehaviour.

Armed with such information, it became easy for people to dismiss the warnings and forecasts, because they had been unaffected by the good times that funded such excess. Worse still the politicians then squeezed the ‘have-nots’ further even after tax money had been used to bail out the bankers who had caused the financial crash. Why did the politicians follow such action? The alternative was to increase public funding, and that would inevitably have meant increasing the taxes on the wealthiest.

In the same way as Brexit has forced an opportunity to rewrite the way the UK conducts its business internationally, our politicians must seize a different opportunity. They have the chance to change policies and control the excesses of inequality and remove poverty. It cannot be done without greater regulation of companies. Much as the companies will protest, their excesses have shown that they cannot be trusted with a completely free market.

Forward Thinking argues that radical changes to tax and benefits are a precondition of creating a society where the extreme levels of inequality are addressed. Of course there are other issues that contributed to the national divide on Brexit, not least the huge geographical differences. Commerce and industry could be encouraged to concentrate its growth outside London through a coherent regional development campaign. That is more the province of politicians but clearly commerce and industry bosses have their role to play in that development too.

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