September 24, 2018; Guardian and the British Broadcasting Corporation (BBC)
Earlier this month, NPQ wrote about the plans of the British Labour Party, the country’s leading opposition party, to require all companies with 250 or more employees to make provisions for employees to become partial company owners. This week, the Labour Party revealed in far more detail just how “inclusive ownership funds” under a future Labour government would function.
In particular, the details revealed include the following:
- An estimated 10.7 million workers—40 percent of Britain’s private sector workforce— at companies with 250 employees or more would be given up to £500 a year each in ownership shares.
- Additional income per worker would be capped at £500 (about $658 US).
- Dividends above £500 would go to a fund to pay for public services and welfare. This tax provision is expected to raise £2.1 billion ($2.76 billion US) by the fifth year of implementation.
- Companies would be required to transfer one percent of their ownership into an inclusive ownership fund each year, up to a maximum of 10 percent. Smaller companies could create similar funds if they choose.
- The funds would be held and managed collectively; their shares could not be sold or traded; this provision is patterned after Britain’s highly successful John Lewis Partnership, the country’s largest employee-owned firm, with a total of 83,000 employee-owners.
- Workers’ fund representatives would have voting rights in the same way as other shareholders.
John McDonnell, Labour’s shadow chancellor (Treasurer-in-waiting) explains to Rajeev Syal of the Guardian that the funds “would go some way to redressing growing inequalities after a decade when average pay has not increased in real terms.” McDonnell adds that worker participation in corporate governance has been beneficial in Germany, citing that country as a model for some of Labour’s proposals. In Germany, McDonnell says. “You get more investment, you get longer-term decision making, and you have a growing economy.”
Lorraine Talbot, a British law professor at the University of Birmingham, notes in The Conversation that animating these proposals is “Labour’s mission to treat workers—and to make companies treat workers—not as costs or welfare burdens, but as the creators of value.”
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Employee ownership is a major part of Labour’s economic platform, but its economic platform is broader. Another key aspect of Labour’s plans involve a revaluing of the public sector. Water, which remains primarily in public hands in the US, has faced privatization in Britain, but Labour is seeking to bring water and sewerage services back into the public domain.
“Ownership of the existing water and sewerage companies would be transferred to new Regional Water Authorities, with day-to-day operational management in the hands of professional management and the wider workforce,” explains the BBC. Under Labour’s proposal, executives at these firms would earn no more than 20 times than what firm workers earn.
The BBC adds that, “The new authorities would be self-financing, along similar lines to Transport for London, which manages the London Underground, rail and bus services.” Other industries that Labour has announced its intention to bring back into public ownership are the railways, power companies, and the postal service.
All these plans, of course, rely on Labour winning the next British election. While the governing Tory (Conservative) Party is not legally bound to call for new elections until 2022, because of the impending split of Great Britain from the European Union (Brexit), many Britons expect elections to occur in the next year. In other words, Labour’s chance to implement these policies may come very soon.—Steve Dubb