The Labour party’s plans to renationalise water and energy utilities, train companies and the Royal Mail would cost at least £196bn, new analysis by the country’s biggest employer organisation has revealed.
The huge sum is equivalent to the total amount of income tax paid by UK citizens in a single year, and is almost as much as the government’s annual budget for health, social care and education combined.
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Under leader Jeremy Corbyn and shadow chancellor John McDonnell, Labour has outlined proposals to bring key privately-run industries under public ownership if it wins a general election.
But in a report published today, the Confederation of British Industry (CBI) said the upfront cost of this move, which it described as “beyond eye-watering”, would be compounded by ongoing maintenance and running costs, as well as a hefty impact on the UK’s public finances.
The business group added that debt could surge by more than 10 per cent to the highest level since the 1960s as a result of the plans, while servicing this debt would cost an estimated £2bn per year.
In addition, renationalisation could reduce the holdings of savers and pensioners by roughly £9bn – equivalent to £327 for every household in the country.
“The price tag for Labour’s renationalisation plans is beyond eye-watering – close to £200bn – and that’s only the starting point,” said Rain Newton-Smith, CBI chief economist.
“There are so many other genuine priorities for public spending right now, from investing in our young people to the transition to a 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.”
The CBI said that while the government’s assets would increase from nationalisation and there would be potential for increased revenue, the confidence of international investors would be severely hit if Labour refused to pay market value for the industries.
The opposition party has already suggested it would not necessarily pay market prices for Britain’s energy networks, while its proposed £15bn offer for the UK’s water industry is less than half its estimated market value of £44bn.
The latest figures come after the Centre for Policy Studies (CPS) estimated Labour’s renationalisation scheme would cost at least £176bn.
Robert Colvile, CPS director, said the CBI’s analysis vindicated this figure and highlighted the need to “raise the alarm” over Labour’s plans.
“John McDonnell’s continued refusal to recognise the scale of additional borrowing involved in renationalisation, or to provide adequate estimates for it, is deeply worrying,” he said.
“It is clear to everyone that there is more to do to improve the performance of these companies, but many of the problems stem from an absence of competition, rather than the lack of public ownership. Renationalisation remains a solution in search of a problem.”
Previous estimates have also warned that Labour’s so-called inclusive ownership fund, which would hand a tenth of shares to workers, would cost investors £300bn and would effectively raise UK corporation tax to the highest rate in the developed world.
A Labour party spokesperson said: “This is incoherent scaremongering from the CBI, which is bizarrely attacking Labour for compensating shareholders both too much and too little.
“It is disappointing that the CBI seems incapable of having a grown up conversation about public ownership – which is hugely popular, and common across Europe. It sadly reveals that they are more interested in protecting shareholders than in creating a fair economy.”
Main image credit: Getty