Labour Party plans on employee share ownership are misguided

John McDonnell

Knee-jerk dismissal of Labour Party’s Inclusive Ownership Fund idea misses the point, says former Government adviser on employee ownership

Shadow Chancellor, John McDonnell MP has announced he wants to consult on the idea of compelling each company with 250 or more employees to establish an Inclusive Ownership Fund, which will hold up to 10 per cent of a company’s equity collectively on behalf of employees in order to give staff a share of profits, a say in how the business is run and also to finance certain Government spending plans.

Former government adviser on employee ownership (EO) Graeme Nuttall, OBE, partner at Fieldfisher, says that: “The knee jerk dismissal of Labour’s Inclusive Ownership Fund idea by many commentators is disappointing and misses the point”. 

“The key question is: Does the continued lack of awareness of the tremendous benefits of employee ownership justify some form of compulsory employee ownership? In other words, has the time come for the equivalent of a ‘seat belt law’ to change behaviour?  

“The answer is: Probably not, but how to better promote employee ownership does need to be given serious thought.

“Take up of employee ownership remains muted because so many businesses and their advisers lack awareness of this business model and its benefits. 

“The benefits of EO to companies, their employees and the economy as a whole have been shown through repeated studies, including the Nuttall Review of Employee Ownership and this year’s Ownership Dividend Report, which draw on a wide-range of industry experts and business leaders. 

“There is frustration in the EO sector at the lack of substantive progress and a wish for new ‘big ideas’ to promote employee ownership.

“Supporters of employee ownership have previously shied away from compulsion, but is some state intervention now justified to achieve a major breakthrough?

“The Inclusive Ownership Fund can be seen as building on various tried and tested concepts.  Many larger companies have successful discretionary cash bonus plans. 

“Listed companies often allow staff to acquire up to 1 per cent of a company’s equity each year through employee share plans. There are hundreds of private companies that have successfully adopted the trust model of employee ownership.  

“Commentators and policy makers should wait to see the Labour Party’s detailed proposal and, if it doesn’t work for them, respond with their own big ideas on how to boost employee ownership into the mainstream of the UK economy”.