Really important research out today from @CBItweets on Labour’s renationalisation plans. cityam.com/labours-renati… Strikingly, it completely vindicates the similar exercise we did at @cpsthinktank - although their baseline figure for upfront cost of £196bn is even higher than ours.
@CBItweets @CPSThinkTank In fact, it’s really important to dig into this - even on a day when so much else is happening. Which means it’s time for a THREAD.
@CBItweets @CPSThinkTank Back in 2017, when I took over @cpsthinktank, we got endlessly frustrated by Labour’s refusal to provide any estimate of the cost of its promises on renationalisation. So we decided to have a stab ourselves. You can find the results here cps.org.uk/research/the-c…
@CBItweets @CPSThinkTank Knowing we’d get accused of being biased, we made sure that every single figure in our report was independent and authoritative. The only judgment calls we made were on which estimates to use - and we made sure to be as generous to Labour as we realistically could be.
@CBItweets @CPSThinkTank For example, Corbyn had said he wanted to nationalise the Big Six energy firms, but Labour was only actually committed to nationalising transmission and distribution. Likewise, we accepted that rail could be nationalised without upfront cost by waiting for franchises to expire.
@CBItweets @CPSThinkTank Even given that, our minimum price estimate was £176 billion. Strikingly, @jameskirkup and @SMFthinktank came up with their own estimates for the water industry a few weeks later which pretty much matched ours. And now @CBItweets has run the numbers a third time.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank In short, we can be pretty confident that this represents a good ballpark for the fair market value of those assets.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank In the ensuing 18 months, Labour still haven’t come up with their own figures - something we urged them to do in our report. And they still haven’t disputed a single one of our individual estimates.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank Instead, they've deployed four separate rebuttal lines/strategies, which have become fairly familiar.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank First, to play the man not the ball. John McDonnell, for example, described these as “fantasy figures plucked from the air by politically motivated think tanks”. He also claimed our work had been funded by the firms involved - in fact, the SMF’s was, ours wasn’t.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank But again: Labour refused to provide any figures of its own. And now the CBI has backed us up. So that's not really convincing anyone any more.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank Next, Labour has argued that the actual upfront cost will be far lower than the market value. Pushed by @AndrewMarr9, McDonnell insisted that “Parliament will set the price”. cps.org.uk/media/media-co…
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 We actually accounted for this possibility in our report - but warned against it. Because when the state can grab things it likes at less than their actual value, investors’ trust in an economy tends to evaporate fairly quickly.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 Labour have now said that the prices they pay will be influenced by things like levels of investment and past “asset-stripping” by the companies involved.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 Let’s leave aside the fact that this isn’t how markets actually work. Or that investment since privatisation in most of these sectors has actually been far higher.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 (One reason for privatisation in the first place was that utilities had been starved of investment because schools ’n’ hospitals always won the competition for capital. Water bills have risen for example because new owners had to make good decades of under-investment.)
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 What this proposed valuation system essentially boils down to is John McDonnell playing Santa Claus - writing ‘naughty’ and ‘nice’ lists, and rewarding firms accordingly. Which, again, is a really bad way to run an economy.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 It also punishes millions of ordinary savers whose pension pots have been pushed into theoretically safe assets like infrastructure and utilities giia.net/millions-of-uk…
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 The third rebuttal - and the most intellectually respectable - is that we shouldn’t be focusing on the upfront cost, since the state will be gaining an asset: the cost of the borrowing will be covered by the revenues produced.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 To use McDonnell’s analogy, when you take out a mortgage, you’ve got an asset - the house - to borrow against. This is why he can claim that renationalisation won’t cost people anything.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 To which there are a few responses. First, when you take out a mortgage, you generally actually find out how much the house is worth.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 Second, that kind of calculation presupposes both that Labour’s massive programme of spending and borrowing will not affect the interest rates government has to pay, and that these firms will be recognisably the same entities.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 But why commit such vast sums to nationalising these companies if you’re just going to run them in the same way?
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 Labour has promised to use the profits from these firms to pay back the borrowing involved in acquiring them. But it has also promised to ramp up investment; reward the unions; slash bills for consumers; and transform ownership structures to focus less on profit.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 It’s the economics of the loaves and fishes. And they still won't explain how they'll make the numbers stack up.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 The final rebuttal line from Labour is the one it’s used today against the CBI - that this is just pretty normal and nothing to worry about. Everyone else has nationalised industries - why should the UK be different?
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 At a special Labour mini-conference on public ownership last year, Jeremy Corbyn 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...
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 "...Research by the Transnational Institute identifies 835 international examples of privatisation being reversed. It really is happening: from water under citizen ownership and control in Grenoble, France, to mail under national ownership and control in Argentina.”
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 I appear to have been the only person to actually check his sources. And what I found was that the 835 renationalisations he described were, in fact, remunicipalisations: cities, towns, and in many cases villages taking back control of individual services.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 So the 835 included (for eg):
- 8 swimming pools
- 7 Norwegian care homes
- 2 cinemas in Vienna
- Fountain maintenance in Rivas Vaciamadrid in Spain (population 460)
- A kindergarten in Bromskirchen in Germany (population 1,830)
- Groundskeeping for Rotherham Council
- 8 swimming pools
- 7 Norwegian care homes
- 2 cinemas in Vienna
- Fountain maintenance in Rivas Vaciamadrid in Spain (population 460)
- A kindergarten in Bromskirchen in Germany (population 1,830)
- Groundskeeping for Rotherham Council
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 The Transnational Institute does give 49 examples of actual nationalisations. But most are from troubled countries like Bolivia, Ecuador, Argentina, and Venezuela – or Viktor Orban’s Hungary.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 Otherwise, when a significant service was taken back into public ownership, it was generally a case of a particular contract expiring and local or national politicians deciding that they could do a better job.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 There are no convincing examples of an advanced economy like ours deciding to devote tens, perhaps hundreds, or billions of capital to a sweeping renationalisation programme like this.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 Perhaps because they all realise what Labour should too - that if you actually examine the problems with the privatised industries, it’s very hard to see how renationalisation is a panacea.
@CBItweets @CPSThinkTank @jameskirkup @SMFthinktank @AndrewMarr9 Instead, it remains what it has always been - an ideological solution in search of a problem.
