Expansion of employee ownership trusts could create three million employee owners

'Expanding ownership is a durable, meaningful way to give people and communities a powerful stake and a say in their workplaces and economy'

A new report on the potential of employee ownership to reduce inequality and spread economic power is looking at ways to expand the sector.

The report, by the IPPR Commission on Economic Justice, suggests expanding employee ownership trusts, which give employees majority ownership of companies, to create three million employee owners by 2030.

According to this research, ownership of economic assets is highly unequal in the UK. One of the findings of the report is that the wealthiest 10% of households own 45% of the nation’s wealth compared to just 9% for the bottom half.

Furthermore, the median net financial wealth of the richest 10% is £153,900, including stocks and shares, while for the least wealthy half of households, it is just £400.

To tackle the rising inequality, the report proposes expanding ownership to give more people a stake and say in the economy through a national sovereign wealth fund, new tax incentives to encourage employee ownership trusts, and new support for co-operative and mutual businesses.

The UK currently has around 170 employee ownership trusts (EOTs). Established under the coalition government in 2014, these are a form of business model in which a majority of a company’s ownership is vested in its workforce, some of them operating as co-operatives.

The report recommends reforms to corporation tax and inheritance tax to support business owners considering sale of their business to establish an EOT, and encourage external investment.

The paper also suggests that the required rate of pension saving under auto-enrolment is increased to 15%, with employees able to credit the additional savings to their EOT shareholding.

In terms of the co-operative sector, the report calls for the establishment of a Co-operative Capital Development Fund, financed by a levy on the profits of co-operative firms; and a specialist Co-operative and Mutual Development Bank to finance co-operative enterprises.

Mathew Lawrence, IPPR senior research fellow, and co-author of the report, said: “The structure of capital ownership powerfully shapes how economic power is distributed in society.

“With a rising share of national income going to capital, inequality is likely to rise unless we can broaden ownership in the economy. If we really want to ‘take back control’, expanding ownership is a durable, meaningful way to give people and communities a powerful stake and a say in their workplaces and economy.

“The aim of our reforms is to give more people a share of capital, both as useable wealth and for its income returns; and to spread economic power and control in the economy.”

Ed Mayo, general secretary of Co-operatives UK, added: “There are few dynamics in economic policy that are more fundamental but less understood than that of economic ownership.

“Co-operatives are businesses that share ownership, control and profit and we believe in the power of widening ownership in the UK economy. In the context of an uncertain economic climate in the UK, this report could not be more timely or important.”

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