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24 September 2018

John McDonnell’s challenge: how do you make labour market reform sexy?

The answer, in this case, is 500 quid.

By Stephen Bush

How do you make labour market reform sexy? That’s essentially the challenge that John McDonnell and his team are trying to resolve with their policy to make British-domiciled companies pay a dividend to their workers (capped at £500). The actually significant policy change isn’t the £500 a year – it’s a below inflation pay rise for the average British worker – but the package of shareholder rights that would be given to employees.

That’s the stuff that the Labour leadership think has the potential to genuinely transform how British businesses operate. But while “putting workers on boards” – an aim of Labour policy since the Ed Miliband days – isn’t a great retail offer,  “we’ll give you £500” is a good one, as it sounds like a lot of money despite actually being pretty small amount over the whole year.

But what you sacrifice in turning the policy into a retail offer is that it becomes more narrow in scope: Labour has exempted small businesses for the simple reason that many will be unable to pay and you’d expect that many larger businesses, through careful reorganisation and domiciling abroad, will avoid paying the dividend and therefore opt out of putting employees on boards. But that the amount being hived off to employees is so small it may have a smaller impact.  

It fits well into the general narrative Labour is trying to seek in this conference: of a party that takes from the wealthy (in this case, 10 per cent of their company’s wealth) and gives something to everyone (in this case, a cool £500 to its employees.

It’s a lot like Labour’s four extra bank holidays: a lot less transformative than a move to a four day week but with the benefit that, unlike a four day week, the party can announce its bank holiday policy every time there is a bank holiday and every time they get the benefit of a row about it.

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In both cases, the open question is whether what you gain in having a tangible policy goodie to offer to voters, you lose in weakening the policy lever. But in this instance, Labour will feel they have the balance right, particularly as it has succeeded in their other aim – starting a fight with the sector in question.