The Labour Party is going to propose today (24 September) that any company in the Britain with more than 250 workers should hand over 10 per cent of its equity to staff.
According to FTAdviser sister newspaper Financial Times, John McDonnell, shadow chancellor, will tell the Labour conference in Liverpool that this policy will improve Britain's flagging productivity by incentivising millions of workers.
Labour's plan is that every company with more than 250 staff would have to set up an Inclusive Ownership Fund (IOF) owning 10 per cent of the equity.
That would be built up gradually with management handing over 1 per cent a year for 10 years.
Workers would not be able to buy or sell the shares but would benefit from dividends paid out by the company, up to a maximum of £500 per worker.
According to Labour's calculations, 10.7 million workers at larger companies would benefit from this.
The fund, run by a board of trustees made up of workers, would also have voting rights like other shareholders.
The model for the idea, inspired by the Institute for Public Policy Research (IPPR) think-tank and the Co-operative Party announcement in July, would be an "asset-lock" mechanism as used by John Lewis and similar employee-owned enterprises.
One critical aspect of the policy is that the government would collect any dividend payments above the £500-a-head threshold, diverting them towards the public coffers.
That would represent more than £2bn a year after five years, Labour calculates.
The proposed policy, however, is already sparking criticism in the industry.
Carolyn Fairbairn, director-general of Confederation of British Industry (CBI), argued that Labour "is wrong to assert that workers will be helped by their proposals in their current form".
She said: "Their diktat on employee share ownership will only encourage investors to pack their bags and will harm those who can least afford it. If investment falls, so does productivity and pay."
Ms Fairbairn argued that employee ownership does work well for some businesses, "but Labour can't keep assuming that what works for one will work for all".
She said: "It is time to talk to business about what really makes a difference on the ground.
"And while a social dividend sounds appealing, in current form it sounds like yet another new tax that adds to the dangerous impression that Labour see business as a bottomless pit of funding.
"If Labour is really to find solutions that improve lives, they must sit down with firms and understand what will drive productivity and investment. The answer lies in the partnerships, innovation, infrastructure and skills that drive growth. It does not lie in dogma."
Pensions expert and founder of Pension Playpen Henry Tapper also criticised the proposal.
He argued that Labour's proposed policy will target the money employees would be setting aside for pensions in the future.
He said: "We need a cohesive policy to fund our pensions and it is not going to happen by clobbering employers with what they will rightly see as a corporation tax.