A Jeremy Corbyn government would force all big firms to transfer up to 10% of their shares to their workers, Labour has revealed.
In one of the party’s most radical redistributions of power and money for decades, Shadow Chancellor John McDonnell plans to give every employee in private companies a dividend worth up to £500 a year.
McDonnell is set to unveil the proposal for mandatory share schemes in his keynote speech to the Labour conference in Liverpool on Monday.
Under the plans, every company with more than 250 employees will be expected to create an “Inclusive Ownership Fund”, which will pay dividends to 11 million workers every year.
In a bid to widen the ‘John Lewis’ partnership model to all big companies, staff would also have the same rights as shareholders.
Firms would be required to transfer at least one per cent of their ownership into the fund every year, up to a 10% cap over ten years.
Every employee would get the same dividend from the fund, up to a limit of £500 a year. Dividends above that cap would go into a national ‘social dividend’ fund that would be used by the Government to fund public services.
The party estimates that the scheme would be worth £2.1bn to the Treasury in the final year of a five-year Labour government.
McDonnell is set to say: “Workers, who create the wealth of a company, should share in its ownership and, yes, in the returns that it makes.
“The evidence shows that employee ownership increases a company’s productivity and encourages long term thinking.
“We will legislate for large companies to transfer shares into an ‘Inclusive Ownership Fund’. The shares will be held and managed collectively by the workers.”
Inclusive Ownership Funds (IOFs) have been backed by the Co-operative Party and the IPPR think tank last week urged a major extension of employee ownership.
But Carolyn Fairbairn, CBI Director-General, was scathing: “Rising wages are what everyone wants to see. But Labour is wrong to assert that workers will be helped by these proposals in their current form.
“Their diktat on employee share ownership will only encourage investors to pack their bags and will harm those who can least afford it. If investment falls, so does productivity and pay.
“Business has been resilient in the face of uncertainty, but Labour’s anti-business positioning is starting to bite. It’s time for pro-enterprise collaboration, not public proposals that set alarm bells ringing in boardrooms at home and across the world.”
Treasury Chief Secretary Liz Truss said: “This proposal is yet another tax rise from a party that already wants to hike taxes to their highest level in peacetime history. It would make it harder for local businesses to take on staff and pay them a good wage.”
But Tom Kibasi, Director of IPPR, said: “As the IPPR Commission on Economic Justice made plain, a fairer economy is a stronger economy.
“We therefore welcome this new initiative to give workers a greater stake in firms. It has the potential to boost productivity as well as improve household incomes after a decade of wage stagnation.”