Challenging Labour’s Inclusive Ownership Fund proposal

Following months of member engagement and consultation, CBI Director-General, Dame Carolyn Fairbairn, wrote the Shadow Chancellor John McDonnell on the Labour Party’s Inclusive Ownership Fund policy proposal, as outlined at last year’s Labour party conference.

The letter, also covered by the Financial Times, outlined the challenges with the inclusive ownership fund proposal as it stands and the direction of the work of the CBI’s inclusive ownership working group. It also highlighted that business is ready to work with Labour on these policies.

Why now?

Members are deeply concerned by the impact policies such as public ownership of utilities and the proposed inclusive ownership fund could have on investment in our economy. If we want to see our economy thrive, we need to see business invest so they can expand their operations, increase productivity, employ more people and deliver sustainable increases in pay. The UK is lagging well behind its international peers – business investment only accounts for 9% of UK GDP, compared to 13% across the G7.[1]

Additionally, the challenge with the current Inclusive Ownership Fund is the one size fits all approach. Yet our member consultation and the survey we ran reveal the wide breadth of ownership models that exist in the UK. Only 2,089 of the 2.7 million businesses in the UK are publicly listed and so have common shares with a clear market value. The majority of companies in the UK are non-listed companies with a significant number of family businesses. In 2018, SMEs (below 250 employees) made up 99% of all businesses in the UK. And while large businesses only make up 0.1% of businesses, they account for 40% of employment in the UK.[2] Business is not one homogenous entity and therefore there is no one size fits all policy solution.

What business is suggesting

That said, it is fair to say that the current policy landscape is not fully complete. There is a strong case to develop a new opportunity for employees, a hybrid model between an Individual Savings Account (ISA) and a share scheme. It could be called something like an Employee ISA and combine the benefits of portfolio diversification with providing employees with a stake in the business they work for. It would complement existing policy and would be designed in such a way that it is accessible to those on the lowest incomes.

Next steps

The CBI will be using its Autumn Budget submission to make some recommendations on how you can improve the current tax advantages schemes so that you increase the uptake of the different schemes and will continue to work with its members to develop the employee ISA idea. More work needs to be done, but there’s a real opportunity for business to be progressive and bold. We will also continue to work closely with the Labour party and government officials on this issue.

Get involved

Thank you to all the members that have already been involved in the working group. If you would like to put forward your views, please get in touch.

[1] CBI Catching the Peloton report 2018

[2] House of Commons Briefing Paper ‘Business Statistics’, Number 06152, 12 December 2018