Britain pushing `people's capitalism'
``People's capitalism.'' A phrase popularized by New York Stock Exchange president Keith Funston in the 1960s has been adopted as a goal of Britain's Conservative government.
``The people's capitalism is on the march,'' Chancellor of the Exchequer Nigel Lawson asserts.
By that term, he refers to the efforts of the government of Prime Minister Margaret Thatcher to revitalize the economy of Britain by broadening and stimulating private enterprise. These include the privatization of government-owned companies, the sale of public housing to its occupants, the encouragement of share ownership through tax incentives, and a boost to competition in the London securities market.
In an interview in his home and office at 11 Downing Street, Mr. Lawson termed the privatization program as ``perhaps the biggest achievement [of the government] after getting inflation down.''
In its six years in office, the Thatcher government has returned 12 major state-owned companies to the free-enterprise sector. These include British Aerospace, Cable and Wireless, the National Freight Company, Amersham International, Associated British Ports, Britoil, Enterprise Oil, Jaguar Cars, and British Telecom.
Together these add up to one-fifth of the state sector of industry, whether measured by the number of employees or by output.
More sales of state-owned companies are planned. This summer the government is expected to sell its remaining 48 percent shareholding in Britoil. Next year it intends to sell British Gas. It is also making plans to unload British Airports Authority, which operates seven airports across Britain; British Airways; and the Royal Ordnance Factories.
cho Some of the shares of privatized companies have been sold to roughly 330,000 of their employees, who were advised by their union leaders not to buy. Mr. Lawson charges that these leaders ``thus once more show themselves out of touch with their own members.''
The tax treatment of shares owned by employees was improved by the previous Labour government's 1978 Finance Act and by further legislation under the Conservatives in 1980.
``Dramatic'' is the word Lawson uses to describe the result of these changes. The number of ``all-employee share'' plans has risen from 30 in 1979 to around 900 today, with some 750,000 employees holding shares or options on shares with an original value of more than 1 billion ($1.3 billion).
``Employee share ownership,'' said Lawson in a speech last month, ``adds to the general benefits of wider share ownership a sense of identification between employees and the company in which they work, and an erosion of the `them and us' mentality dividing management and work force, which can transform attitudes at work to the benefit of the company's performance and the nation as a whole.''
Other measures taken by the government to stimulate stock ownership include cutting in half the tax on stock transactions, boosting nearly sixfold the threshold at which capital-gains tax becomes payable, abolishing a tax surcharge on investment income, introducing a plan that provides favorable tax treatment for stock options for corporate executives and other ``key personnel,'' and a policy for business expansion to encourage direct investment by individuals in small companies not quoted on stock exchanges.
Chancellor Lawson admitted that direct stock ownership in Britain is well below the level in the United States. In Britain the number of shareholders shrank from about 2.5 million in 1958 to about 1.75 million in 1979, or from more than 7 percent of the adult population to less than 4.25 percent. But since 1979 the number of shareholders has nearly doubled, he estimates.
By comparison, a 1983 survey by the New York Stock Exchange found that about 42.4 million Americans own stock directly, or around 1 adult in 4.
In the area of home ownership, the Conservative government has granted ``council tenants'' -- the renters of government-owned housing -- the right to buy the homes in which they live.
Since 1979 some 750,000 renters have taken advantage of the law. This has helped boost home ownership from 55 percent of households in 1979 to over 60 percent today.
The chancellor of the Exchequer also spoke of the ``Big Bang.'' The term is one used by people in the City of London (that is, the financial district) to describe the day next spring when fixed commission rates on stock sales and purchases will be abolished. Also to be dropped will be policies that create differences between those who buy and sell shares to the public -- brokers -- and those who sell stock wholesale -- jobbers.
Lawson hopes these changes will make London as competitive internationally in the trading of securities as it already is in banking and insurance.
He expects the cost of trading shares to fall dramatically. Commissions did drop decidedly in the United States after 1975 when the previously fixed level was deregulated.
Despite privatization and some restraint on the budget, the Conservatives have not succeeded in trimming the size of government.
Indeed, immediately after taking office, the onset of a sharp recession boosted the proportion of general government expenditures as a percentage of gross domestic product from an estimated 42 percent in fiscal year 1977-78 to some 47 percent in 1982-83.
Since then the proportion has started to decline, but Mr. Lawson concedes it won't likely be back to even the 43 percent level of 1978-79 by the time the government asks for an election, probably in 1987.