How Britain can be a better steward of its assets Ownership matters. A precondition for a high-performing economy is to have engaged owners who steward the assets they control so that they perform well - from co-operatives and employee-owned firms through to family-owned enterprises and the publicly limited company. If George Osborne were genuinely innovative, his budget next week would begin addressing Britain's ownership deficiencies - a surer long-term route to economic recovery than indiscriminate tax cuts. For, in the main, Britain is not a good steward of its assets, as the two-year investigation by the Ownership Commission (which I chaired) reports today. The country has allowed ownership to become too monolithic; more than half our economic activity is organised through publicly limited companies. They have many advantages - professional management, capacity to raise equity and debt at scale - but too many of their owners are now transient, transactional and fiercely short-term. As a result many company executives find themselves managing the profit expectations of their absentee landlord shareholders, rather than delivering innovative goods and services. There is a bias against investment and innovation. The other side of the coin is that Britain's co-operative and employee mutual sectors are too small and undernourished; both represent less than 2 per cent of gross domestic product. They should be larger and given a better chance to show their worth. Family-owned small and medium-sized companies, the lifeblood of any capitalist system, are also woefully few: Germany's "Mittelstand," the basis of its success in innovation and exports, is two-thirds larger than our own. So, the first conclusion of our report: Britain should explicitly aim for more diverse ownership of its economic assets. The government should monitor the character of ownership and introduce an impact test to assess how its policies affect it. No form of ownership should be at a tax or regulatory disadvantage to others. More varied ownership will make businesses more resilient and offer more choice for consumers, workers and investors. But how? The strategic aim must be to close the vast gap that has opened up between managements of plcs and their owners; and to find ways to support better family firms, co-operatives and employee-owned enterprises, where that gap is narrower by definition. A "budget for better ownership" would begin by rationalising or eliminating the many anomalies in the tax system that militate against good ownership. Instead of crude cuts in corporation tax, Mr Osborne should begin sheltering "normal" rates of return from tax altogether, making normal profits - like debt interest - tax deductible. He should focus initially on family-owned enterprises but aim to extend the principle to all businesses, as the Mirrlees report on taxation recommended last autumn. Investors and savers should also be allowed to make normal rates of return tax-free. The aim is to make Britain's small and medium-sized enterprises more resilient and capable of taking more risks. Mr Osborne should end aggressive taxation of founders" initial transfer of shares to workers, subsequent loans and profit distributions, which all inhibit employee ownership. He should make it easier for co-operatives to issue bonds. Lastly, he should clear the way for a new form of shareholder engagement: the "aggregation platform." Essentially, this would allow institutional investors to delegate their voting rights to "aggregators" who, charging for the service, could use the pooled votes to engage better with company managements. They might take the form of not-for-profit mutuals, with sectoral specialisms, that would hold executives to account for both their strategies and their pay. It would be a fast route to better shareholder engagement. The total cost of such measures in the first year could be less than £1bn, increasing later. Its value, in signalling the kind of economy Britain wants, would be incalculable. The writer is chairman of the Big Innovation Centre and principal of Hertford College, Oxford