Create three million employee-owners to reduce inequality now, says think tank

Changing the way companies are owned would drastically reduce inequality and ‘spread economic power’ throughout society, according to a new report.

The government should set up a fund to develop co-operatives and incentivise employee ownership trusts (EOTs), with the aim of creating three million employee-owners by 2030, if it really wants to make Britain fairer, the IPPR Commission on Economic Justice said today.

A national Citizen’s Wealth Fund should also be established to give the public a share of corporate assets, the think tank added, otherwise growing national wealth will cluster around a minority of individuals and never be widely shared.

As it stands, Britain scores exceptionally poorly as an economic democracy, coming 25^th out of 32 among advanced economies, largely because the ownership of economic assets is so unequal.

The wealthiest 10 per cent of households currently own 45 per cent of the nation’s wealth compared to just 9 per cent for the bottom half.

Mathew Lawrence, a senior research fellow at IPPR and co-author of the report, said:

“The structure of capital ownership powerfully shapes how economic power is distributed in society.

“…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.”

Unequal ownership of economic assets drives inequality because the share of national income going to capital owners in the form of profits has been increasing, and is likely to rise further, while the share going to labour, in wages and salaries, has declined, the IPPR explained.

If a greater share of national income goes to capital owners, and capital ownership is narrowly concentrated, inequality is likely to rise.

Rebecca Long-Bailey MP, shadow secretary of state for business, energy and industrial strategy said Labour supports plans to widen the ownership of the economy.

She said:

“[The IPPR report] highlights not only how unequal the ownership of wealth is in the country but the increasingly unequal shares of national income which result from this. Forces like automation and the rise of large digital firms make this trend likely to continue.

“This is why, in the Labour Manifesto, we wanted to widen the ownership of the economy through measures like nationalisation of key utilities and the expansion of the co-operative sector.

However, Labour wants to develop and refine these ideas and others to broaden ownership. This report makes a valuable and thoughtful contribution to this important issue.”

EOTs place the majority of a company’s ownership in its workforce, meaning over half of company profits are distributed to workers, and workers have much more say in how the firm is run.

In a co-operative all assets are owned jointly by members.

There are currently 7000 co-operatives in the UK owned by their workers or consumers, with around 223,000 employees and a combined turnover of £35.7 billion, according to the IPPR’s figures.

Charlotte England is a freelance journalist and writer at Left Foot Forward. Follow her on Twitter.