Can Britain afford nationalisation?
by James Allen, Consultant

When Labour’s 2017 Election Manifesto was prematurely (and possibly intentionally) leaked, its contents echoed Michael Foot’s 1983 Election pledges. Back then, the Austin Metro was the UK’s best-selling car, Gandhi swept the board at the Oscars, the CD was first introduced to Britain, and Harold Wilson stood down as an MP after 38 years. The 1983 Labour Manifesto was supposed to have been the final cadaveric spasm of British socialism.

It took 34 years to get here, but in 2017 Labour committed itself once again to bring back into public ownership assets which the Conservatives privatised.

When ComRes asked the British public their views following the leak, 49% said they supported renationalising the energy industry and 52% supported renationalising Britain’s railways. More recently, that support has risen to 77% for electricity and gas and 76% for railways, with more than four in five of the British public in favour of renationalising the water industry.

This support is not limited to the young, whose recent memories and support for Corbyn, it has been claimed, helped deny Theresa May a majority (although BES data highlighted that the ‘youthquake’ was merely a tremor ). Instead, four in five of those aged 45 and over support renationalising electricity - a higher proportion in fact than 18-24 year olds (70%) . What has turned the British public’s opinion of renationalisation from an eccentric throwback to the 1980s, into a mainstream view?

Perhaps the answer stems in part from the 2008 Crash, since then there has been a decade of what many claim to be “austerity” - but in reality public debt levels have only ever been higher in wartime. UK debt to GDP was 50.2% in 2008 but in 2016 hit 89.3%. In money terms, UK Government debt was less than £0.5 trillion in 2005 but today stands at almost £2 trillion (or £32,000 for every UK citizen). In fact, in the five minutes it takes you to read this Pollwatch, UK national debt will have increased by £1.5m.

A decade on and the promised balanced books have not been delivered, public sector pay caps remain, local government struggles to make ends meet and the NHS annual winter crises are as predictable as the autumnal leave drop.

Where David Cameron was adept at painting a positive vision of Britain’s future (even if Government debt rose more on his watch than at any time since WWII), his successor has struggled to connect with voters positively. With the help of what some have decried as his magic money tree, Jeremy Corbyn has filled this gap and posited Labour as the yes-we-can party of optimism.

For Britain’s targets for nationalisation, the public mood has been largely a function of frustration - at continued economic pressures, at reduced real incomes, at a perceived (and sometimes real) lack of competition and at fat cat salary disparities.

Yet often the claim that competition is worse now than when the energy companies were in public ownership is hard to defend, even if price rises are often higher than inflation. Take energy for example: British Gas increased tariffs by 12.5% over the summer of 2017. Yet that same year a record number of energy customers – some 5.5m - switched supplier. When they were nationalised, switching was not possible.

The real bunfight over nationalisation will come over its cost. Earlier this month John McDonnell claimed that Labour’s plans for public ownership would be cost free (although requiring additional debt) on the basis that ‘you borrow to buy an asset and when that asset is producing profits like the water industry does, that will cover your borrowing cost’. The Social Market Foundation reckons it could cost £90bn to nationalise the water sector, and the Centre for Policy Studies puts a figure of £176bn on the wider nationalisation programme – or an additional £6,500 of debt per household.

So it looks like the future debate will come down to the following question for voters: do you want to continue paying bills on the current basis, or do you believe Labour’s claims that privatisation will be cost-free?

While support for ‘nationalisation’ as a bare concept is an easy answer to give to a poll question, it is unclear what real risks voters are prepared to take in the face of what would represent a huge change in the UK’s business landscape, especially in the years after Brexit.