We need to share economic success

Nick Clegg, the former deputy prime minister, recently visited Ebbw Vale in South Wales on behalf of the BBC. The town has been a huge beneficiary of investment from the European Union – £1.8bn since 2014 – and yet 62% of its inhabitants voted for Brexit. Clegg, a leading Remain campaigner, wondered why people voted against the “source of so much investment in this community”.

Their decision may seem less perplexing once you know that this remains one of the most deprived areas of the UK: 25% of adults are on benefits and a third have no educational qualifications at all. Although EU blue flags can be seen “literally everywhere”, the people of Ebbw Vale remain discontented.

As the UK heads for a clean break from the European Union, there will be a great deal of focus on trade. Yet if Brexit happened because the people of Ebbw Vale didn’t share the rewards of globalisation then a new model for trade won’t relieve them of their discontent. The critical debate will be on domestic economic policy. How we share the rewards of economic success will make us viable in the long term – or not.

This debate is more muddled than ever, and the political battle lines are incompatible with the conundrum that extreme economic inequality presents. While Jeremy Corbyn’s vision of state ownership is closer to the historic roots of the Labour Party than its MPs might dare to embrace, he’s getting closer to the nub of our economic dilemma than the Conservative Party could dare to imagine. The more crucial debate today is not about public or private ownership – it’s about ownership full stop.

Home ownership, arguably a mainstay of social content since World War II, has been declining in recent years. And the idea of wider share ownership is now just a dream, despite the popularity of the 1980s privatisations. The control of productive wealth – business equity – by fewer and fewer people is acutely troubling.

It is through business equity that the financial riches from economic progress are shared – the fewer people own it, the wider income disparity will be in future. Without broader ownership at the heart of economic reform, responsibility for the dispossessed will increasingly fall to the state. There are many causes of this, including structural flaws in our pension system, corporate tax rules that favour debt over equity finance and a regulatory focus on averting risk. Fuelling all of this, though, is cheap money. Ultra-low interest rates have facilitated one of the biggest land grabs in history.

Private-equity funds making leveraged buyouts, firms using debt to fund share buy-backs, landlords building buy-to-let portfolios – the land grabbers come in many forms. As do the losers – from pension schemes corralled into low-yielding bonds, to young people priced out of the housing market. The cost of ownership has collapsed for the few, but the rest have been priced out.

An economic agenda with broader ownership as its goal would need to tackle all these causes as one. If the ownership problem is largely monetary, however, then the solution is too. While experts try to justify the idea of “helicopter money” via the monetisation of government debt, the outcome would be statism on steroids – Whitehall allocating apparently free capital to white elephants. However, monetary support for pools of broadly owned equity capital – perhaps in the form of funded individual pension accounts – would embed ownership into our economy.

When Nick Clegg talks about the EU as the “source” of funds for Ebbw Vale, he’s backing the statist response to economic exclusion. The real “source” is ownership. Unless more people are closer to this, all attempts to make our economy look and feel more inclusive – either through the EU or national government – will fail.