Labour widens its nationalisation Net
The Labour manifesto is expected to be published next week, following its finalisation at the Party’s formal Clause V meeting this weekend. The working assumption had been that Labour’s proposals for nationalisation were settled and limited to those industries identified by Jeremy Corbyn in his conference speech this autumn, as being “rail, mail, water and the National Grid.” This was turned on its head last night with Labour’s announcement of its plans to nationalise BT Openreach and provide free full fibre broadband to every household and business by 2030.
Labour claimed that this would cost £20 billion at the outset with ongoing costs of £230 million a year, paid for through a tax on tech firms such as Amazon, Google and Facebook. As with other proposed nationalisations, investors would not receive compensation based on full market value and Labour would compensate existing shareholders with government-backed bonds, rather than in cash. Under attack for the impact this would have on shareholders and pension funds, Shadow Chancellor John McDonnell argued today that bonds would offer investors stable and secure returns, in contrast with BT’s declining share price.
If Mr Corbyn was to enter Downing Street, this approach to nationalisation, including paying book value rather than full market value, would come under significant scrutiny as legislation is introduced in Parliament. We have recently seen how difficult it is to pass controversial legislation through the Commons and the Lords without a working majority. Nationalisation does not command universal support even on the Labour benches and so realistically enacting these plans, in this form, would require a Labour government with a clear majority. The muted reaction of the markets to this announcement suggests that they concur with polling expert Sir John Curtice that the chances of such an outcome are “close to zero” and may also reflect the fact that any legislation, if passed, is likely to be challenged in the courts.
Yet, perhaps this is a little complacent. Can the City really be sure that the SNP, so far silent on this issue, would not be prepared to do a deal with Labour that included nationalisation (amongst other things) in return for IndyRef2? In the event of a hung parliament, any number of permutations and combinations are possible.
The Conservative Party called the proposal a “fantasy plan”, claiming the initial cost could top £80 billion and the industry response claimed that the proposals would be a disaster for the telecoms sector and ultimately hit consumers. Some Labour moderates privately wonder whether this really is the best use of tax revenues and accept that investment may be diverted away from industries that become nationalised.
Yet critics of Labour’s plans should not assume that voters will automatically dismiss this policy out of hand or that labelling these proposals as “broadband communism” will gain any traction. Many people feel frustrated about their current internet service and even if they are not entirely convinced by nationalisation or supposedly “free” broadband, they might still credit the party for constructing a bold plan to fix an everyday problem. Alongside Labour’s ambitious plans, the Conservatives broadband proposals could be regarded as “more of the same”.
Today’s announcement has certainly injected interest into what has so far been a lacklustre campaign. It will be interesting to see whether this is just a one-off announcement or the start of the roll-out of a manifesto with surprise elements and a domestic prospectus that is, for better or worse, truly radical.
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