Workers set for £500 income boost under Labour’s inclusive ownership fund plan - McDonnell

Workers could be up to £500 a year better off under Labour’s plans to expand employee ownership of large companies, John McDonnell will say.

In his keynote speech to Labour’s annual conference tomorrow (Monday), the Shadow Chancellor will set out how making employees part-owners of their company will substantially boost their incomes.

Under Labour’s plans, every company with over 250 employees will be expected to create an “Inclusive Ownership Fund”. John McDonnell will use his address to delegates to pledge that dividend payments from the scheme will be worth up to £500 a year for workers by the end of Labour’s first term in government.

The Shadow Chancellor will also say that the whole of society should benefit from the principle, with over £2bn more available for public services and social security as a result of capping individuals’ dividend payments at £500 and putting the rest into a social dividend.

In his conference speech, John McDonnell MP, Labour’s Shadow Chancellor, is expected 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.

“The shareholding will give workers the same rights as other shareholders to have a say over the direction of their company.

“And dividend payments will be made directly to the workers from the fund.

“The dividend payments workers will receive will be up to £500 a year.

“That’s 11 million workers each with a greater say, and a greater stake, in the rewards of their labour.

On the Social Dividend:

“But we all know it’s not just the workers of a company that create the profits it generates.

“It’s the collective investment that we as a society make that enables entrepreneurs to build and grow their businesses, maintaining the roads and investing in the infrastructure we rely upon, educating the workforce, caring for them when they’re sick and investing in the research and development that enables technological innovation.

“So we believe it’s right that we all share in the benefits that investment produces.

“That’s why a proportion of revenues generated by the ‘inclusive ownership funds’ will be transferred back to our public services as a social dividend.

“Mobilising billions that could be spent directly on the social security system which supports those who have retired, are unable to work, or need society’s support in other ways.

“We will be a Labour government committed not just to meet the challenges facing today’s generation but to secure the long term future prosperity of the next.”

Ends

Notes to editors

• ·       Inclusive Ownership Funds (IOFs) were proposed in the 2018 Co-operative Party report, “Co-operatives Unleashed”

• ·       IPPR “Prosperity and Justice” report, published last week, called for “an extension of employee ownership, to give people a greater stake and voice in their workplaces. 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.”

• ·       The IOFs will be mandatory for all companies over 250 employees. This means the IOFs will cover, at a minimum, 40% of the private-sector work force, or 10.7m people in work.  The final coverage will be higher than this, since we will ensure workers effectively employed by an employer also have a claim (this will also reduce the incentive to create dummy contracting-out). All company employees will be eligible to participate in the scheme.

• ·       For smaller companies, we will offer the voluntary creation of an IOF. These could be attractive to smaller businesses with an owner looking to retire and handover to their workforce, or to those smaller companies growing rapidly and therefore looking to build-in inclusive ownership before they hit the 250 mark.

• ·       The mechanism by which the IOFs will operate is that every year companies will transfer at least 1% of their ownership into the Fund, up to a maximum of 10% total IOF shareholding.

• ·       These shares in the IOF will confer voting rights on the IOF as a whole, in the same way as ordinary shares do. They will also confer rights to dividends from the company, in proportion to the shareholding held, in exactly the same way as ordinary shares do.

• ·       The IOF itself will be administered by a Board of Trustees. This Board will be elected from the company’s eligible employees.

• ·       Equal dividends will be paid from the IOF to the workforce, up to a capped limit of £500. Dividends from the IOF above that cap will be placed into the social dividend fund.

• ·       The IOF shares will not be available for sale or transfer, being held through an “asset-lock” mechanism like that used by John Lewis and other employee-owned enterprises.

• ·       Payments from the IOF will be made to individual, eligible employees.

• ·       Dividend payments made through IOFs above the cap will be placed into the national fund, to allow risk-sharing and redistribution of the benefits of wealth. Our estimates for its size, using the same database, in the final year of the Labour government, are £2.1bn.

• ·       We will be consulting widely on the scheme design ahead of entering government to ensure the best possible policy with the widest support is passed into law.