A Stake in the Country
By NICHOLAS DAVENPORT The Labour Party would solve the problem (a) by outright nationalisation of part of the wealth in private hands and (b) by giving social priorities to its economic and financial policies. But it must be admitted that the last time they were in office they made the workers in the nationalised industries feel more alienated than ever. The socialisation they carried out brought no change in the worker's status, but merely a change in management—and that of a peculiarly obnoxious bureaucratic type. The railway workers, for example, must feel, if Dr. Beech- mg has his way, that far from having a stake in the country, they do not even have a stake in the railways.
The Conservative Party would solve the prob- lem by trying to convert our society into a property-owning democracy. One active section of the party has been spreading the gospel of wider share ownership and company profit- sharing, but in spite of having had the last Prime Minister's son as its titular head it does not appear to have had a great success. At most, the number of people owning shares has risen from 2 per cent to 3 per cent of the population in the past twelve years. And its profit-sharing Plan by no means contributes to social harmony, for it can only create a new privileged class of workers. More than half the working population Would be ineligible for profit-sharing, being en- gaged in public enterprise or in private gain where the profit is not readily divisible. The unit trust movement has certainly grown in popular favour and may even be appealing to a few of the workers, but even in America, where the corresponding mutual funds have spread more rapidly than our own unit trusts, it can hardly be said that a property-owning democracy has Yet emerged out of the old capitalist system. Ile gulf between rich and poor is perhaps wider than ever.
In the IVestminster Bank Review for February,
Alan Day suggests a new way for solving this difficult problem. It is to issue for public subscription 'national equity' bonds paying a gradually increasing dividend related to the rise in the gross national product. As the GNP is ex- pressed in monetary terms, the dividend would rise not only with the growth of the economy, but with price-inflation. Thus, if real growth in any one Year were 4 per cent and if price-inflation Were to account for an extra 3 per cent in monetary terms, the dividend would increase in to following year by 7 per cent. The idea seems b''') roe daft. The subscriber to a 'national equity' 211, di.far from feeling that he would have a IVin the economic success of the country, as Mr. Day claims, would undoubtedly feel that he
had a stake in the economic failure of the country. For his dividend would go up the more the nation failed to secure growth without in- flation. The honest worker would no doubt feel disgusted; indeed, he would probably refuse to subscribe to the bonds on the• grounds that he would be supporting a dishonest inflation. The more cynical or wicked would probably regard it as a racket and would jump at the chance of adding to the inflationary part of the dividend by backing frivolous wage claims. National morality would take a severe beating. Indeed, an immoral government would seize the opportunity to buy votes by promising higher and higher dividends on 'national equity' bonds. The rate of interest on honest fixed securities would be forced up to extreme heights and we would quickly descend to a state of dear money, suspect finance and raging inflation worse than any spendthrift Latin American republic has ever seen.
Now there is much to be said for any honest attempt to give the workers a chance to accumu- late savings—that is, capital—and to make that capital grow, but Mr. Day's bright idea is draw- ing a red herring across the track. A better plan is for the State to set up and manage an equity unit trust and provide facilities for workers to put their savings into it in the usual form of 5s. sub-units. I put forward this plan many years ago in this column and, having now had some experience of unit trust portfolios, I have come to the conclusion that the State should issue two distinct equity unit trusts--under one manage- ment, of course, to save working expenses— which would appeal not only to the workers seek- ing to accumulate capital, but to those who already possess capital.
First, I suggest an Estate Duties Unit Trust --EDUT to distinguish it from the private-enter- prise EDITH (Estate Duties Investment Trust) —which would invite public subscription to a trust formed to hold the shares taken over from private estate under the Estate Duty. The trust would, of course, be selective. It would inform the trustees of the deceased estate which shares it was prepared to take over at middle market prices and which shares it would refuse at any price. Picking the best, it would offer a 'growth' equity portfolio which would be. immensely popular.
Second, I suggest a State Participation Unit Trust (SPUT), which would invite public sub- scription to a trust formed, like any other unit trust, to buy holdings in the equities of well- managed private-enterprise companies, quoted or unquoted. It was at one time the policy of the Labour Party to acquire holdings in the industrial leaders of the private sector by pur- chases in the open market. I am not sure whether this policy has been officially dropped or put on the shelf, but I am putting my plan forward, not to further a policy of socialisation, but simply as a means of giving the uninvested public `a stake in the country' which it would otherwise find difficult to acquire. The equity portfolio would be carefully selected for 'growth' and good management. It would avoid companies operat- ing solely abroad and concentrate on home companies contributing most to the domestic economy. It would be as attractive as EDUT, but would perhaps have a more popular appeal, being more widely spread and offering a higher dividend yield. Judging by the popularity of existing unit trusts, I think these State unit trusts, expertly but economically managed, would be a raging success.
I am not oblivious to the fact that these State unit trusts would give the State an increasing slake in private enterprise—the Treasury being the registered holder of the shares—but their im- portant advantage is that they would encourage savings and would allow anyone who had even a modest accumulation of capital to feel that he had a stake in the country when he bought his first £100 of units.
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