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Carl Mortished: The grinch at the heart of McDonnell’s socialist Santa

Labour’s shadow chancellor is proposing that companies should hand over 10% of their shares to staff: PA
Labour’s shadow chancellor is proposing that companies should hand over 10% of their shares to staff: PA

Wouldn’t it be nice to get a big fat dividend every year, not just the measly Christmas bonus but a whopping great lump of money, enough for a new kitchen or perhaps a luxury holiday? That’s what the bosses get, the privilege of being an owner, entitled to a share in the annual profit, unlike a lowly worker on a fixed wage.

But what if everyone was an owner? That’s the tempting idea that John McDonnell is dangling in front of us. Labour’s shadow chancellor is proposing that companies that employ more than 250 people should be forced to hand over up to 10% of their shares to staff.

At a stroke of the legislative pen, employees all over the country would get a stake in their workplaces, boosting not just incomes but morale, motivation, solidarity and performance. We would be like John Lewis partners, our pockets upholstered with lovely dividends as we sashay through the soft furnishings department.

It’s a very old idea that is getting a new lease of life; the Employee Ownership Association says there are now 300 employee-owned firms in Britain contributing £30-40 billion to the economy and a study done by Cass and Manchester Business School, The Ownership Effect, suggests there is a positive link between employee ownership and performance — profit-sharing makes us all try a little bit harder.

Sadly, McDonnell is not really talking about profits for workers; he is talking about shares for the state. Take United Utilities, a company that paid £271 million in dividends in 2017/18. If it had divvied up a tenth of that amount to the 5300 people employed directly by the water company, each worker would have walked home with almost £5100. You can almost hear the whooping among retailers as the nation’s newly enfranchised staff load up on new fridges, curtains and tellies.

Not so fast. There is a little grinch hiding in the heart of McDonnell’s socialist Santa; under his scheme the dividend has a maximum payout of £500 per employee. What would happen to the remaining £4600 dividend owed to each United Utilities employee? It would be paid to the state, of course, to create a huge pot of money — the Labour Party reckons it could reach £2 billion per year — to be used by government to boost infrastructure programmes.

So, a Labour government would force an infrastructure firm to pay dividends to its workers which would then be expropriated by the state and used by civil servants to build infrastructure.

Except that would not happen because McDonnell has another agenda. He intends to nationalise the water companies, and their workers would end up toiling for the state with no prospect of ever owning a share in any business.

Under the guise of wider share ownership, the shadow chancellor has hidden a plan to expropriate a tenth of the distributable profits of almost half of the nation’s successful private enterprises. Even more depressing: the attempt by the Labour Party to piggy-back its tax grab on a workers’ rights programme has probably set back the cause of wider employee ownership by a decade.

It ought to be a good thing; extending share ownership has to make sense to good employers even if there is no easy way of proving that an employee-owner is more productive than a mere wage-taker. A work ethic is not a collateral obligation that attaches to a share certificate; it is part of your personality, something you learn at a very early age, probably from parents.

For an employee ownership scheme to work well it must be more than just a dividend. It has to be about management too. The right to share in the profit must imply taking on some of the obligations of ownership, including responsibility for the outcome of business decisions. If the John Lewis partners’ dividend is shrinking this year, it is because of poor management decisions. If all the employees own the business, they must accept responsibility for that failure and the need to pull together and make it right.

Successful employee-owned companies are often smaller businesses that espouse a collegiate culture. It’s a world very far away from the top-down state-controlled monolithic enterprises that the shadow chancellor would like to direct in his fantasy command-and-control economy.

How workers would benefit in such an archaic world is still not clear.