Deputy Prime Minister Nick Clegg is to propose a tax break on bonuses handed out to staff in employee-owned firms as he attempts to boost what he calls the “John Lewis economy”.

Clegg will outline plans to consult on the issue in the summer in a speech to the Employee Ownership Association, according to The Guardian.

He is proposing “a relief on tax on bonuses paid through benefit trusts, where a significant chunk of the business is owned by employees”. It will form part of a £50m plan to boost new firms set up under employee-owned models.

For companies to qualify rewards need to go to the whole company and not just those at the top. Retailers that would qualify include Blackwell’s and Sports Direct.

The Government has for a long time hailed the benefits of company-owned models, best exemplified by John Lewis.

Clegg is expected to say: “Employee ownership works because it so neatly aligns incentives and puts the workers at the heart of the business.

“Many owners end up selling to the investor who has the largest cheque book but little regard for the traditions, employees and customers of the firm.

“Others hand the business down to their children even if that isn’t what they or their children really want. What we want to encourage is for more owners to sell the business on to those people who know the business inside out, who will go the extra mile, the wider family who have worked to build it up and contribute to its success – in other words, the employees.”

There has been a 10% growth in the number of employee-owned firms in the past year.

“A diversity of business models in an economy is important because it ensures that not all firms are structured to take short-sighted, gung-ho risks on behalf of others,” he will say.

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