By Daniel Zaydman
In recent months, Jeremy Corbyn, the leader of the United Kingdom (UK) Labour Party, and his Shadow Chancellor of the Exchequer, John McDonnell, have unveiled a slew of new economic plans designed to drastically restructure the United Kingdom’s economy and close its soaring wealth gap. One of the most important plans, inclusive ownership funds, lays out the foundation to democratize workplaces across the UK.
The Labour Party’s plan for inclusive ownership funds mandates that over the course of the next decade, companies with a staff of over 250 workers place 10% of their equity into a fund that would then be redistributed among its workers. Estimates show that the plan would affect an estimated 7,000 companies and shift nearly £300 billion into the hands of workers and the state — with workers receiving yearly dividends capped at £500, and the surplus/excess being used for various state-planned initiatives, mainly social services. Importantly, shares in the fund would not be subject to trade or sell-offs, and smaller companies would not be mandated to create an IOF.
Here is why all of this matters.
In 2010, the Conservative-Liberal Democrat coalition government implemented various policies aimed at reducing government budget deficits — also known as austerity — in response to the 2007-08 financial crisis which saw government debt balloon to levels that put the UK at risk of default. Leaders at the time believed that heavy cuts to government spending, in addition to increased taxes, would balance the country’s budget while staving off a potential recession. As a result, the UK saw government spending cut spending in nearly every part of the public sector, which led to horrific ripple down effects.
For example, decreased spending on public housing coupled with astronomical increases in rent and dismal wage growth has led to an almost 50 percent increase in homelessness since the start of austerity. Moreover, spending on social care for children has gone down by nearly £1 billion since 2010, corresponding with a 77% increase in the number of children assessed to be at risk of harm or neglect and a 15% increase of children in foster care. The National Health Service, one of Britain’s most popular public services, has seen budget increases cut by over a half from 3.7% annually to 1.5% leading to budgetary holes of about £30-40 billion and a decrease in quality of service and accessibility. A recent study estimates that since 2012, 130,000 deaths could have been prevented if improvements in public health policy had not been put on hold due to austerity.
Though the UK budget has returned to pre-crisis levels, the continued use of austerity as a policy has shown that the government has prioritized the protection of capital over its own people. Labour’s plan for the establishment of inclusive ownership funds is the kind of economic modeling that does exactly the opposite.
With yearly dividend payments of up to £500 amounting to about a 2% increase in wages for the average worker, Labour can bump wages to levels not seen since before the financial crisis. With the estimated excess of £2.1 billion going to the state each year, coupled with reforms to increase corporate and income taxes for high earners, the government can maintain a sustainable budget without taking away essential services. Worker ownership of enterprise has always been shown to increase productivity relative to conventional companies, something crucial to improving the health of a British economy which has seen productivity dip to near the bottom of the G7. Most importantly, democratic ownership of production will alleviate the desire for economic sovereignty that many Britons sought when they voted to leave the EU. With the increasing likelihood of another referendum on Brexit, it is imperative that the Labour party offer plans to deal with the underlying issues that first led voters to vote ‘Leave.’
After nine years of upheaval to revered social services and frustration fueled by repeated failed attempts to leave the European Union, it is time for the Labour party to take back control of Parliament and guide the UK back to normalcy. British voters have a chance to create generational economic change under the bold leadership of Jeremy Corbyn and his cabinet. It is time for the UK to seize that opportunity.
Photo courtesy of Steve Eason (Flickr).