Labour conference: John McDonnell unveils shares plan for workers

Labour would force all large firms to give shares to their workers worth up to £500 a year each, John McDonnell will say later.

In his main party conference speech, the shadow chancellor will set out planned “inclusive ownership funds”.

Firms would have to put 1% of their shares into the fund every year up to a maximum of 10%.

The Confederation of British Industry said Labour’s “diktat” would “encourage investors to pack their bags”.

Since its conference opened in Liverpool on Sunday, Labour has already announced plans for worker representation on company boards and to make employers provide up to 10 days’ paid leave for victims of domestic violence.

Further announcements are expected to include:

• Proposals to scrap laws allowing private landlords to evict tenants without giving a reason
• A policy to ban the creation of new academy and free schools in England

The party’s power brokers have also agreed on wording for Tuesday’s motion on what the party should do about Brexit if it cannot get a general election. It keeps “all options on the table” on Brexit, including the possibility of campaigning for a new referendum.

In Monday’s speech, Mr McDonnell will tell delegates that Labour’s inclusive ownership plans would give workers a financial stake in their employers and more say over how companies are run.

The amount workers available to workers would be capped at £500, with the rest – estimated at £2.1bn a year by the end of a five-year Parliamentary term – going into a fund to pay for public services and welfare.

‘Broadening of ownership’

The scheme would apply to companies with more than 250 workers, although smaller firms could set up inclusive ownership funds if they wanted to.

Labour calculates that 40% of the UK’s private sector workforce – some 10.7 million people – would initially be covered by the scheme. Dividend payouts would be made at a flat rate to all employees of the firm.

The funds would be held and managed collectively, with a bar on selling or trading their shareholdings. The system would be similar to that operated by employee-owned retailer John Lewis.

But payments from the fund would be made to individual, eligible employees, Labour sources said.

Workers’ fund representatives would have voting rights in companies’ decision-making processes in the same way as other shareholders.

Labour aides said the creation of the funds would help redress growing inequalities after a decade when average pay has not increased in real terms.

But the dividend payments would not be available to state employees – including workers in industries such as water, which Labour hopes to nationalise.

Labour sources say the £2bn social dividend fund would ensure public sector workers and employees of smaller firms also benefited from what the party calls a “broadening of ownership in our economy”.

‘Another tax rise’

Mr McDonnell will tell Labour delegates in his speech at 12:15 BST: “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.”

He will add: “We believe it’s right that we all share in the benefits that investment produces.”

Carolyn Fairbairn, director general of the CBI, which represents big business in the UK, said Labour was “wrong to assert that workers will be helped by these proposals in their current form”.

She said: “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.”

The Conservatives said Labour’s proposal was “yet another tax rise” that would make it harder for firms to “take on staff and pay them a good wage”.