One of the great achievements of Labour’s time in office was the devolution that allowed different economic models to begin to emerge across the United Kingdom. Although there has been interesting and impressive growth in parts of the country, it is nothing compared with what we need for the years ahead. Let us be honest; it will be impossible to match what is happening in the east, in Asia, unless we put behind a strategy the real power of fiscal, banking and monetary policy.
To rewrite the rules of our labour market, the commission proposes a real minimum wage of £10.20, set 20% higher for anyone on a zero-hours contract—an important, interesting and innovative idea that should command our attention—and it proposes New Zealand-style rights of access for trade unions, crystal-clear rights to join a union and trials of auto-enrolment in unions for workers in the gig economy. Why are these things so important? They are important because of the power that is now exercised by giant firms in our economy. Over the summer, The Economist reported that the $5 trillion merger wave in the United Kingdom is, adjusted for scale, 50% greater than in the United States.
According to the International Monetary Fund—of all people—that rise in market power is much more pronounced in the UK than it is elsewhere. It looks at price mark-ups as a proxy to judge market power. The mark-ups it found in the United Kingdom are about 60% since 1980. That is way ahead of the average for the advanced economy. We are more dominated by technopolies than many other countries, and the price for that is paid not by shareholders or chief executives but by workers. That is why we need to rewrite the rules of the marketplace, to rebalance power in the marketplace.
In the boardroom, we should finally privilege those with a genuinely long-term perspective—also known as workers —by putting them on boards. The IPPR proposes at least two on every company board with more than 250 staff. Why is that important? The chief economist of the Bank of England recently reflected that once upon a time the average length of a shareholding in a British company on the stock exchange was something like six years. Now it is only six months. Shareholders are no longer the long-term stewards or guardians of a company’s interest. It is the workers, and very often suppliers, who have the longer term interest. We need workers on remuneration committees, to stop the ludicrous expansion of chief executive pay. Crucially, we need to change section 172 of the Companies Act 2006, which we wrote, in order to ensure that directors have a fiduciary duty to have regard to the long-term interests of a company and the welfare of all stakeholders, not simply the stakeholders known as shareholders.
In the capital markets we need new fiduciary duties for asset managers and priority rights for long-term investors, like the rights that are enjoyed by shareholders in France. America and Italy. We need new tests for takeovers, plus crucial reform of competition law to introduce a new public interest test to check today’s uncontrolled technopolies that are carving up the digital marketplace. Finally, to ensure that wealth is genuinely shared, we need a new £186 billion citizens’ wealth fund, in order to help redistribute wealth to our young people who are struggling under the burden of high debt, sky-high student loans and the challenge of saving to put down a deposit on a home.
To help rebalance the fiscal system and ensure that money is available, the IPPR proposes a total overhaul of our tax system, with German-style formula-based calculations of income tax. Crucially, we need the equalisation of income and capital gains tax—much as we had when capital gains tax was introduced in the 1960s—and new wealth taxes. It is extraordinary that the stock market is up by about 40% and the property market by about 25% since the financial crisis. The wealth of assets in this country has multiplied exponentially, yet wealth taxes are still only 5% or 6% of GDP—the level they have been since the early 1970s.
Let me conclude with a reminder of how much is at stake in this debate. Globally, Oxfam estimates that about half of global wealth is in the hands of the richest few. That means that, globally, 85 families own as much as the poorest 3 billion of our fellow citizens on the planet. We can have an argument about how we share the wealth that is on the table, or we can think afresh about the wealth that is to come. If the richest 1% carry on accumulating wealth at the rate they have enjoyed since the financial crash, they will not own half the world worth by 2030; they will own two thirds—two thirds of global wealth will be in the hands of the top 1%. It will be impossible for us to restore any meaningful measure of equality in this century if we allow that situation to unfold. What will affect inequality in the years to come is not simply the exponential rise in the wealth and assets of the richest—a rise that is forecast as up to £217 trillion in the hands of the luckiest few—but what will happen to the poorest and the working poorest in our country.
We need to zero in on what is happening in the automation of the world of work. At the World Bank and IMF meetings earlier this year, the chief executive of the World Bank was very clear that automation will hit people in different ways. Some people will be hit harder than others—young people will be hit hard, and the working class harder still. My research, undertaken with the House of Commons Library, shows that among the poorest 25% of the labour market—someone who is on less than £9 an hour—2.1 million jobs are at risk of automation. Why? Because automation will hit retail, transportation and routine manufacturing, where most of Britain’s working class happen to work. If we lose those jobs, the impact will be five times bigger than the shutdown of the coal and steel industries put together. Think about how those communities are still scarred today by the seminal changes during the 1980s. We can see these changes unfold in our economy. Those workers will be left behind in tomorrow’s economy unless we change strategy.
We have to answer the question: are we prepared to stand by and watch this happen? We cannot and we will not. We need to have new ideas and turn them into action. We have a blueprint for those ideas today. I want the Minister to tell us just what she disagrees with in this seminal report.