Employee ownership could help to reduce economic inequality, claims IPPR

NEW MODELS of company ownership could help reduce inequality and spread economic power, according to a new report for the IPPR Commission on Economic Justice.

The report recommends the expansion of Employee Ownership Trusts, which give employees majority ownership of companies, with the aim of creating three million employee owners by 2030.

IPPR’s report found that ownership of economic assets is highly unequal in the UK with the wealthiest 10 per cent of households owning 45 per cent of the nation’s wealth compared to just 9 per cent for the bottom half.

The median net financial wealth of the richest 10 per cent is £153,900, including stocks and shares, while for the least wealthy half of households it is just £400.

Mathew Lawrence, IPPR senior research fellow and co-author of the report, said: “The structure of capital ownership powerfully shapes how economic power is distributed in society.

“With a rising share of national income going to capital, inequality is likely to rise unless we can broaden ownership in the economy.

“If we really want to ‘take back control’ expanding ownership is a durable, meaningful way to give people and communities a powerful stake and a say in their workplaces and economy.”

The IPPR says ownership can be expanded by creating a national sovereign wealth fund, new tax incentives to encourage employee ownership trusts and new support for co-operative and mutual businesses.

Employee Ownership Trusts (EOTs) are a form of business model in which a majority of a company’s ownership is vested in its workforce. Established by the Coalition Government in 2014, there are currently around 170 EOT businesses.

Such trusts enable over half of company profits to be distributed to workers, and also means workers exercise a much more significant role in the governance of the firm.