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Tue, 27 October 2020

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EXCL Labour demands ban on 'unacceptable' shareholder payouts for companies getting coronavirus help

EXCL Labour demands ban on 'unacceptable' shareholder payouts for companies getting coronavirus help

Labour said the public would back business through 'gritted teeth' if companies were seen to be profiting from Covid-19 help.

3 min read

Businesses that have benefitted from the Government's raft of coronavirus support schemes should be banned from paying dividends to their shareholders, Labour is demanding.

Shadow Chancellor Anneliese Dodds said it would be "totally unacceptable for executives and shareholders to profit from public support" as she called for a Danish-style moratorium on dividend payouts and share buybacks at firms who have accessed public help.

Writing for The House Live, Ms Dodds said many businesses were "struggling through no fault of their own" amid the widespread shutdown of life in the UK.

But she warned that the public would look back on state help for businesses with "gritted teeth" unless bosses "play their part in building for the future of our country".

"There will be even less excuse for any business not to pay its way" - Shadow Chancellor Anneliese Dodds

France has already moved to ban companies who benefit from financial support from buying back their shares or paying dividends to shareholders, with the country's finance minister Bruno Le Maire saying last month that the move would encourage companies to keep cash invested in the day-to-day running of their businesses.

Denmark has also gone down the same route in recent days, and has said companies registered in tax havens will not be eligible for taxpayer cash as it fights to steady the economy amid the coronavirus pandemic.

Ms Dodds said: "There was never any excuse for the industrial levels of tax avoidance and evasion we have seen in the UK. But there will be even less excuse for any business not to pay its way, as we exit the current crisis with a desperate need for properly-funded public services. 

"And it would be totally unacceptable for executives and shareholders to profit from public support - so we must see a moratorium on dividend payouts and share buybacks, as required by the Danish government, for those companies that have benefitted from government support."

Labour is also calling for all companies that are supported by public money during the Covid-19 crisis to sign up to measures to cut carbon emissions such as the United Nations's Science Based Target Initiative, which aims to bring corporates into line with the Paris climate agreement to limit global warming.

The Shadow Chancellor said: "As we exit this crisis, we must of course also guard against the existential crisis posed by climate change - and again, business can and must play its part."

She warned: "When the public looks back on the support it has given business over this period in 5 years time I want it to do so with pride rather than gritted teeth. That won't happen unless we ensure that, as a nation, any gains from public equity accrue to all of us, and not just those who are already asset-rich. That means considering carefully how the gains from supported industries can be shared - and not just the losses."

The intervention from the Labour frontbencher comes after Chancellor Rishi Sunak unveiled a wave of measures designed to support companies through the crisis.

Downing Street on Friday said companies had applied for some 3.8million workers to be furloughed since the start of the coronavirus outbreak, meaning the state is in line to pay up to 80% of their wages up to £2,500 a month under the coronavirus job retention scheme.

The latest figures meanwhile show that £2.8billion in lending has been made available to small and medium-sized businesses under the Coronavirus Business Interruption Loan Scheme - which sees the state guarantee loans from banks to small firms to help them stave off collapse.

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