I said in my last blog post that the Labour Party’s plans to take 10% of a company’s shares and pay the dividends into an employee trust did not make much sense. I have actually worked out what the implications of such a scheme would be on a few large UK public companies. These are the figures (after 10 years and assuming 10% of the total dividend is therefore paid to employees):
- BP pays £6.15bn in dividends and has 74,000 employees: £8,310 per employee.
- Shell pays $10.87bn in dividends and has 92,000 employees: £9,846 per employee.
- M&S pays £304m in dividends and has 84,000 employees: £360 per employee.
- Tesco pays £82m in dividends and has 448,000 employees: £18 per employee.
The latter two do of course have many part-time employees. How they might be treated is unknown so I have assumed they get an equal share. Tesco has also been paying a low dividend of late because of past financial difficulties but even if it returned to previous levels, the pay-out to each employee would be low – hardly sufficient to motivate them.
In the case of the oil companies where they have relatively few employees in a capital- intensive business, the pay-out would exceed the £500 cap in year one, so it would be mainly the Government that benefited.
This seems a perverse result to say the least. Are M&S and Tesco employees so much less worthy than BP and Shell employees? Whether an employee got any worthwhile share of the dividends would much depend on the kind of company they worked for.
Another odd result is that the Government would collect a lot more in tax (the amount above the £500 cap) from capital intensive companies than from those with lots of employees.
The more one looks at this, the more perverse this scheme turns out to be.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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The FT provided an analysis of how much extra tax the Government would gain from the dividend scheme. It’s £5.9 billion per year after ten years they say. That’s equivalent to a 10% rise in Corporation Tax which generates about £55bn per year.
Roger Lawson