ROBERT COLVILE: If you see Sid, tell him Labour will raid your nest egg and your pension
Like a broken record, the Labour Party is constantly reminding us that their plans for the economy are simply common sense.
All they want, they claim, is to make Britain a little bit fairer. And who could object to that? But little by little, the true extent of Labour’s plot for Britain’s economy is becoming apparent — and it should terrify us all.
Jeremy Corbyn and John McDonnell, his Shadow Chancellor, have always been clear that they want to embark on a sweeping campaign of renationalisation. Last week, it was the water companies.
Today, McDonnell is expected to announce plans to nationalise the UK’s energy network. The railways and Royal Mail are also in their sights.
Jeremy Corbyn and John McDonnell, his Shadow Chancellor, have always been clear that they want to embark on a sweeping campaign of renationalisation
Yet time after time, they have refused to tell us how they would pay for it.
The Centre for Policy Studies, of which I am Director, calculated last year that the minimum price would be at least £176 billion.
That’s an extra ten per cent on the national debt, or £6,471 for every household. These are extraordinary sums, which Labour has gone to great pains to say that it won’t pay.
Instead, according to leaked plans, a Corbyn government would undervalue these companies and snap them up.
So the water firms, for example, will be taken into state control for a fraction of their true value: some £15 billion to £20 billion, as opposed to the market value of £86 billion.
While McDonnell says this would punish the ‘asset strippers’ who have invested in the firms, in reality hard-working savers and pensioners would end up picking up the bill.
The Global Infrastructure Investor Association, which promotes private investment in infrastructure, calculated that 5.8 million UK pension pots are invested in the water firms — and millions more in Labour’s other targets.
And it’s been over 30 years since the government launched its infamous ‘tell Sid’ advertising campaign, urging hundreds of thousands of people to buy shares in British Gas — many of which they still own.
If Labour extended its land grab to snap up all of the big six energy firms rather than just the transmission network, as Jeremy Corbyn has said he wants to do, those ordinary Britons would see their retirement savings savaged — being compensated not with the actual value of their shares, but ‘the appropriate payment that Parliament will decide’.
But that’s only the start.
Britain’s prosperity depends, in a fundamental way, on whether the Government obeys the economic rules set by previous Parliaments.
Until now, investors have put their money into this country because they know the state won’t suddenly decide assets are worth only a fifth of the price.
Comrade McDonnell’s plan would shatter this reputation.
Who would invest in Britain under such a government? Indeed, who would risk starting a new company?
McDonnell and his lieutenants have floated the possibility of firms being forced to hand shares to workers, or to a government sovereign wealth fund (in the case of companies floating on the FTSE), or for ‘national profit sharing schemes’ to punish those that make the most effective use of new technology.
If Labour extended its land grab to snap up all of the big six energy firms rather than just the transmission network, as Jeremy Corbyn has said he wants to do, those ordinary Britons would see their retirement savings savaged
Today, McDonnell is expected to announce plans to nationalise the UK’s energy network. The railways and Royal Mail are also in their sights
This wouldn’t just hit the wealthy. It would have ghastly repercussions for all of us.
Under a Labour government that has promised to spend and borrow hundreds of billions, the interest rates charged on Britain’s debts are likely to rise sharply — especially if that government further rattles the markets by seizing assets on the cheap.
So either taxes would rise to accommodate this, or Britain would plunge further into debt — undoing all the hard work carried out by Conservative governments since the financial crisis.
What’s galling about this isn’t just its financial illiteracy, but also its would-be perpetrators’ dishonesty.
Labour, blinkered by its own dogma, has dismissed our estimates, and similar work by the Social Market Foundation, as ‘fantasy figures plucked from the air by politically motivated think tanks’.
Yet every figure in our report came from independent experts — and the £176 billion was a bare minimum. We could have chosen estimates that were far higher.
Regardless, Labour claim renationalisation would not have a cost because the profits made from the state-owned companies could be used to cover the extra debt.
But they simultaneously promise to use the profits to repay debt. And to cut bills for consumers. And to massively increase infrastructure spending. And to run the companies with less regard for profit in the first place.
As so often with Labour, it relies on the economics of the loaves and fishes. Even Diane Abbott couldn’t make the numbers add up.
As so often with Labour, it relies on the economics of the loaves and fishes. Even Diane Abbott (right) couldn’t make the numbers add up
Corbyn insists nationalisation is a tried-and-tested approach. Last year, at the chillingly titled Labour ‘Alternative Models of Ownership Conference’, he grandly proclaimed: ‘From India to Canada, countries across the world are waking up to the fact that privatisation has failed and are taking back control of their public services.’
He then went on to cite some ‘835 international examples of privatisation being reversed’ — even though they included villages taking back control of individual services, such as a swimming pool.
The kind of sweeping renationalisation of healthy companies Labour proposes has barely been seen outside the socialist basket-cases of Latin America.
And there’s a reason for that: by and large, privatisation has worked. In water, energy, post and even rail, it has been accompanied by significant increases in productivity, efficiency and investment.
There are, of course, problems. But it’s hard to see how nationalisation would solve any of them.
After all, these industries’ flaws generally result from too little competition rather than too much.
Equally disturbing is the insidious impact that nationalisation has on democracy.
Today as a consumer, you can punish a company by switching to one of its rivals.
But in Labour’s Utopia, you might find that you ‘own’ the company — so when things go wrong, where do you turn?
As Margaret Thatcher said: ‘The moment ownership passes into the name of the public is the moment the public ceases to have any ownership or accountability, and often the moment when it ceases to get what it wants’
And if the unions that bankroll Labour demand higher wages, at the cost of higher bills for you, who’s going to tell them no?
With these workers sitting on boards alongside Momentum activists, reform would be impossible.
As Margaret Thatcher said in 1976: ‘The moment ownership passes into the name of the public is the moment the public ceases to have any ownership or accountability, and often the moment when it ceases to get what it wants.
‘But it is invariably the moment when the public starts to pay. Pays to take the industry over. Pays the losses by higher taxes. Pays for inefficiencies in higher prices.’
With Labour, it wouldn’t take long for this to happen. State control is addictive.
In no time, its proponents would ask themselves: If these firms, why not others?
Why not nationalise broadband? Or medical research? Or Google?
The truth is this isn’t about economics — it’s about control. The people in charge of Labour have spent decades convinced capitalism is the enemy, that competition is a curse and that the path to prosperity is for the state to take command of the economy — and hand it to their cronies.
But the more control of the economy they get, the more it will falter.
As Maggie warned the first time such people came near to power: ‘The Labour Party is like a pub where the mild is running out. If someone doesn’t do something soon, all that’s left will be bitter. And all that’s bitter will be Left.’
Robert Colvile is the Director of the Centre for Policy Studies think tank
Source: Read Full Article