Worker shares

Labour has outlined radical plans to boost “employee ownership” by insisting that every British company with more than 250 employees must hand over “10% of its equity to workers”, says the FT. The Institute of Directors has attacked shadow chancellor John Mcdonnell’s proposal as “draconian”.

How would it work? Companies would have to set up “an inclusive ownership fund” on behalf of workers, building up their 10% stake gradually over a decade by handing over 1% chunks each year. Workers wouldn’t be able to buy or sell the shares, but would get dividends, up to maximum of £500 per person. A key aspect of the policy is that any payments above the £500-a-head threshold would be diverted “to the state coffers”. Labour reckons that would generate £2bn annually after five years.

The policy’s main problem is that it would be hard to implement across the board, as foreign-owned businesses and privately held companies do not routinely pay dividends. The shadow chancellor’s team has admitted these groups “could not be forced to do so”, meaning that “one-third of the 10.6 million workers technically eligible for dividends would not benefit”. The move could also encourage public companies to delist from the LSE. And, if companies trim elsewhere to compensate, the policy may actually lead to a lower pay settlement for staff.