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Report on renationalisation

Labour’s public ownership plan would cost £196bn, says CBI

Scottish Labour leader Richard Leonard at a nationalisation rally (pic: Terry Murden)

Labour’s plans to nationalise swathes of industry would cost at least £196bn, according to the CBI.

The employers’ group estimates the cost of taking water, energy utilities, rail and Royal Mail into public ownership would be equivalent to all income tax paid by UK citizens in a year. It also equals the combined budgets of the £141bn NHS budget, and the £61bn spent on education.

The cost re-nationalisation was calculated using the stock market values of public companies and the asset values of private firms. It applied a typical 30% acquisition premium. 

The CBI warns the policy could lead to a 10.7% increase in debt to 94% of GDP, the highest point since the 1960s, and would cost around £2bn per year.

The Labour Party spokesman said it was “incoherent scaremongering from the CBI, which is bizarrely attacking Labour for compensating shareholders both too much and too little.”

Labour said the study does not take into account the revenue that the newly nationalised industries would generate for the government.

The party has also said that re-nationalisation would be cost neutral as the government would exchange liabilities in the form of bonds for ownership of companies. 

But Rain Newton-Smith, CBI chief economist, said: “The price tag for Labour’s re-nationalisation plans is beyond eye-watering – close to £200bn. And that’s only the starting point. It doesn’t take into account the maintenance and development of the infrastructure, the trickle down hit to pension pots and savings accounts, or the impact on the country’s public finances.

“There are so many other genuine priorities for public spending right now, from investing in our young people to the transition to low carbon economy and connecting our cities and communities. These issues are what keep businesses up at night and what they want to see the government get on with addressing.

“Firms want politicians to invest in major infrastructure projects rather than undermine confidence in our economy and waste time, energy and public money in a re-nationalisation project with no clear benefits.

“Investment in skills, infrastructure and innovation is how we will enable firms to grow, create jobs, and raise living standards in communities across the country – not by returning to failed, ideological economics that would make millions of people poorer in their old age.”

The report said confidence of international investors in the UK would be “severely hit” if Labour refused to pay full market value for the industries.

The CBI said its analysis included the water companies, National Grid, the electricity transmission networks, the distribution network, operators and gas distribution networks in England, Scotland and Wales, as well as the rail rolling stock and Royal Mail.

In a speech to the UK Co-operative Party conference on Saturday, Scottish Labour leader Richard Leonard criticised the SNP for encouraging privatisation of public assets and their subsequent acquisition by overseas interests: “from our railways to our energy suppliers, from our airports to our steel industry.”

He said: “We are not the party of market forces and excessive wealth accumulation. We are the party of people before profit and the more equal society. That is who we are  and that is what we always should have been. “

He said today that Scottish Labour would scrap powers handed to councils to levy a workplace car parking tax and “will build a reliable public transport system that is publicly owned and accountable as well as more affordable, making it far easier to leave the car at home.

“The next Scottish Labour government will bring our railways into public ownership and build a free bus network for Scotland in a meaningful response to the climate emergency.”

While the CBI confronts Labour policy, the Conservatives’ spending plans have not escaped criticism. The Institute for Fiscal Studies said last week that Boris Johnson planned to raise spending close to levels indicated by Labour’s 2017 manifesto. It also warned the Tories that pursuing a no-deal Brexit could lift the national debt to levels unseen since the mid 1960s.

The Tories will also try to undermine Labour’s plans to renationalise the railways by announcing today that it will end the controversial rail franchising system.

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