Labour has announced plans to require all companies employing more than 250 people to set up “ownership funds”, giving workers financial stakes in their firms and increasing their influence over how they are run.
Shadow chancellor John McDonnell told the Observer newspaper the move would deliver greater equality by forcing an “irreversible shift in wealth and power in favour of working people”.
Mr McDonnell, who said turmoil over Brexit could trigger another general election, wants to introduce the legislation in his first year as chancellor. He will outline the plans, which could mean workers receiving dividends to boost their incomes, in a speech to the TUC conference in Manchester on Tuesday.
He said the move “will ensure that in large companies, in addition to rewarding workers with wages, they will reward them with shares that will go into a pool that will allow them to have an ownership role”.
Announcing his plans – which follow lobbying from MPs in Labour’s sister party, the Co-op Party – Mr McDonnell cited a report published by the Institute for Public Policy Research (IPPR) Commission on Economic Justice last week which included ideas to give millions of people “a greater stake and voice in their workplaces”.
The IPPR said “the aim would be to give more people a share of capital and to spread economic power and control in the economy by expanding the decision rights of employees in the management of companies”.
Alongside proposals to rebalance the economy, such as the establishment of a national investment bank and the creation of clusters of tech industries around the country, the IPPR says all companies with more than 250 employees should have at least two worker representatives on the board.
The report also suggests firms should be required to put a percentage of profits into an employee fund that would build up over time, giving the workforce an increasing say in key decisions. Workers would not be able to cash in shares, but could receive dividends from the fund to boost their pay.
The discussion puts employee ownership models back in the spotlight. The Conservative Party had briefly flirted with the idea of worker representation on company boards, with Theresa May advocating the model during her leadership pitch before backtracking last year. And Labour had included plans for more democratic ownership structures in its 2017 general election manifesto.
The ideas in the IPPR report have already received support – with some caveats – from the co-operative movement.
James Wright, policy officer at apex body Co-operatives UK, which was consulted for the report, said: “It was important to represent the co-op sector through our response to the commission’s call for evidence – and we’re delighted to see our positive influence manifest itself in the final report. We certainly applaud the commission for its ambition and for emphasising the intrinsic links between inclusive economics, ecology, productivity and wellbeing.
“If the commission can attract pluralistic, non-partisan political support for its plan then there is real hope. We share the commission’s understanding of where co-ops fit into this wider agenda for economic reformation.”
He added: “We agree with some aspects of the policy prescriptions for co-ops; for example on legislative reform, buyouts and common wealth creation. But what’s missing is a clearer emphasis on behavioral change and improving co-op knowledge and know-how in business ecosystems and communities.”
The Employee Ownership Association said that having a greater range of business ownership structures is “key” to developing a thriving UK economy. It said: “Start by empowering the individual with a ripple effect on productivity and resilience for businesses, regional economies and the wider economy.”