The government’s focus on a share-owning democracy is long overdue

There is a sense that the City remains a detached, aloof place, separate from the rest of the country, but it wasn't always like this

It's time the British public tuned into the equity markets again (Reuters)

Walking through the City the other day, I felt a pang of nostalgia.

I was in Moorgate, and sadly, the bar, where I remember the door flinging open and a young, suited chap charge in to the packed room, shouting “fancy some stagging, boys?” as he brandished some share application papers, is no more. It’s been turned into a smart new office with all the usual steel and glass trimmings.

Those were crazy days. It was post-Big Bang, the Americans had arrived, the City was changing, and booming. It was also the period of the Thatcher privatisations. State-owned utilities and other government assets were offloaded to the public. Provided you had the brass you could try and buy shares in whatever was being sold, either to own long-term or to sell them on, short-term, and make a quick killing – hence the term “stagging”.

I used the word “try” deliberately. Because these offerings were heavily over-subscribed, usually generously priced to get them away – so the calculating were able to make an instant profit. Queues would form round the block as would-be purchasers strove to hand in their applications before the deadline. Even then, they would subsequently only receive a portion of what they wanted – such was the demand.

Genuinely, they were heady times. Today’s IPOs, by contrast, are deadly-dull affairs, involving a pre-agreed sale to a faceless institution. Of course, there were those who argued against the whole notion of privatising state property, who maintained that the shares were only going to the well-heeled, to the same voters who propelled Mrs Thatcher to power and kept her there.

Regardless of the rights and wrongs of the sell-offs, however, there’s no doubt that the sales had a transforming effect. A large chunk of Britain became turned-on to the equity markets, and the concept of share ownership. For this was the then administration’s avowed aim, the creation of a “share-owning democracy”, as well as raising billions in revenue for the Exchequer.

Collectively, we became more interested in how the City works, in personal finance, and investment. Suddenly, we were able to purchase shares in a decent business; we could manage our own affairs; we could take an interest in our shareholding, in the company and how it was performing and being managed.

Somehow, somewhere that connection, that involvement, has been lost. Individual share ownership is falling, down from 11 million people owning shares to 8 million. Now the government has decided to do something about it.

They’re right to be concerned. Take away equities, and the most accessible form of investment still, for many people, is property. And as a nation we’re far too reliant on that.

The sense today is that we’ve gone back to where we were before, that the City remains a detached, aloof place, separate from the rest of the country, more interested in dreaming up ever-more complex investment schemes, relying increasingly on expensive technology and mind-boggling algorithms, and the irresponsible use of other people’s money. That’s what occurred in the banking crisis, that so nearly brought the entire financial system crashing down, and there’s little to say it could not happen again.

The great state sell-off project is long gone – there’s not much left in the Whitehall locker worth selling. But that leaves a largely untapped area, for exploration and exploitation, that can still help achieve the share-owning democracy goal.

It’s ordinary people holding shares in their employers, the promotion of the mutuality model evinced by the likes of John Lewis, the retailer hailed by numerous politicians on the left and right, and by commentators, as the ideal structure.

Last week saw publication of the Ownership Dividend, a report by a committee chaired by the Lib Dem peer, Baroness Bowles, into employee shares. She’s a champion, maintaining there is a “whoosh” effect, that within months of staff being either given or buying shares, there is a marked and positive effect on profits, investment and, perhaps most pertinently, their happiness.

Bowles has come up with a set of proposals, including increasing the current £3,600-per-year limit on tax-free qualifying bonuses and eliminating National Insurance contributions on those bonuses.

Transferring ownership to employees would do much to underpin small and medium-sized enterprises and family businesses, which, if they’re not sold inevitably face succession planning problems. Says Bowles: two-thirds of the UK’s small companies do not have a succession plan in place, while only 13 per cent of family-owned businesses are planning ahead.

The Tories have followed Bowles by asking one of their own, the former cabinet member and ex-City executive, Michael Fallon, to take a closer look, and to report back to the Treasury before the year-end (possibly for the chancellor to say something around the time of the Budget).

The timing could not be better for another reason. Owning shares in your employer is increasingly taken as a given among the millennial generation. They’re keen to start their own businesses, and UK PLC is desperate for them to do so, to create an enterprise economy. They see staff shares as the norm. You name, too, a tech giant that doesn’t have workers owning shares.

Finally, after decades of neglect, the share-owning democracy is back on the agenda.

Chris Blackhurst is a former editor of The Independent, and executive director of C|T|F Partners, the campaigns and strategic communications advisory firm