Labour's McDonnell sets out plans for 'inclusive ownership fund'

In a speech at the Labour party conference in Liverpool, the shadow chancellor made the case for legislation that would give workers more of a stake in business, and discussed the wider application of the Fair Tax Mark

The shadow chancellor, John McDonnell, proposed that every company with 250 or more employees will be required to develop an 'inclusive ownership fund' that would provide additional income of up to £500. Dividends above this would be added to a national fund that will be used to pay for public services.

Under the scheme, businesses would transfer at least 1% of their ownership into an inclusive ownership fund each year, with a maximum threshold of 10%. He said: ‘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 shadow chancellor stated that 'the Labour movement has always believed that democracy should not stop when we clock in at the factory gate' and said that the party was determined to push for legislation that would protect workers from ‘long hours, low productivity, low pay’ and exploitation. Calling it ‘the greatest extension of economic democratic rights that this country has ever seen’, McDonnell said that it would allow '11m workers' greater involvement with their employment.

‘Workers who create the wealth of a company should share in its ownership and in the returns that it makes. The evidence shows that employee ownership increases a company’s productivity and encourages long-term thinking.’

McDonnell’s proposal received some criticism from the CBI. Commenting on the response, Chris Blundell, partner at MHA MacIntyre Hudson, said:

‘It is surprising that the CBI's immediate reaction to Labour’s employee ownership plan is that it is a “diktat” or an imposition and will reduce productivity not increase it. For a start employee ownership is a policy of the Conservative party too. Indeed it was they who brought in Employee Ownership Trusts in 2014 to facilitate this.

‘Organisations like the CBI need to understand the changed public mood that "austerity", voting for Brexit and the financial crash of 2007/8 has ‎brought. It is far from impossible that Labour may get elected. So rather than standing against whatever Labour says because it is a Socialist/Marxist party the CBI and others should be considering how they can engage with Labour to help them adjust their proposals to be workable if they think they aren’t. To do otherwise is naive.

‘There is a very strong case for supporting employee ownership given evidence shows it can significantly improve productivity and it is to be hoped more organisations will think about moving towards a John Lewis type employee ownership business model.’

In the speech, McDonnell went on to pledge a ‘real living wage of £10 an hour’, with wages being determined ‘by sectoral collective bargaining’, and a third of the seats on company boards to be allocated to workers, extending ‘economic democracy’ across the UK.

He also announced that tax avoidance by companies and individuals would be made a priority for a future Labour government and said: 'The Tories record on tackling tax avoidance and money laundering has been a disgrace. We can’t trust the Tories on this but we shouldn’t just wait until we get into government. We should act now.'

Plans to force companies to sign up and adhere to the Fair Tax Mark standards were mentioned, prompting Paul Monaghan, chief executive of the Fair Tax Mark, to say: 'In the past, UK institutional investors shied away from the issue of responsible tax planning - preferring to turn a blind eye to the enormous tax evasion and avoidance of many of the companies they invest in.

‘However, in recent months this has started to change, in large part driven by recognition that the UK public have this as their number one issue of concern when it comes to corporate conduct. But also because an increasing number of businesses and corporate leaders are standing up and proudly supporting the principle of paying the right amount of tax in the right place at the right time.

At present 44 companies, including FTSE 100 energy company SSE, have received the Fair Tax Mark, which is given after an independent assessment of a company's tax transparency.

McDonnell latterly attacked the Conservative Party’s austerity measures and justified his proposals by saying: ‘The greater the mess we inherit, the more radical we have to be; the greater the need for change, the greater the opportunity we have to create that change - and we will.’

Report by James Bunney

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