Wake up! Corbyn is a real threat
BUSINESS has been slow to wake up to the very real risks of a Labour government led by Jeremy Corbyn. Executives might have been lulled into a false sense of security because of the experience of New Labour, which prided itself on being benign towards business.
Tony Blair and Gordon Brown were so intent on countering accusations that Labour governments would lay waste to the economy with socialist dogma that they went too far the other way.
The light touch regulation of that era, coupled with laissezfaire takeover rules, indulgence of tycoons and private equity barons and, latterly, a relaxed attitude to debt did not cause the financial crisis – but it certainly did little to stop it.
Corbyn makes no bones about the fact that if elected, he would like to take the City and business generally back to the pre-Thatcher CITY EDITOR period. In a speech a few days ago to manufacturing group EEF, he blamed her ‘Big Bang’ deregulation of the Square Mile in 1986, for unleashing a wave of speculative finance at the expense of real industry.
But there was no golden age in the City. Pre-Big Bang, it was infested with Tim-Nice-But-Dim types who indulged in a little light insider dealing (not illegal then) before a long lunch. There were no big foreign banks, but no women and no meritocracy either.
The Corbynites are also bent on undoing the privatisations of the Thatcher years. Now we mention it, why stop at nationalising utilities – with the excessive pay at Persimmon, housebuilders will be next in the party’s sights.
The commitment to nationalisation is ideological rather than pragmatic. Labour studiously avoids costing out its nationalisation plans but they would be very expensive indeed. The Centre for Policy Studies takes a stab at £176 billion, equivalent to 10 per cent of the national debt, or £6,400 for every household. You could build nearly three million council houses for that money.
Another think-tank, the Social Markets Foundation, puts the cost of privatising the water industry alone at £90 billion, plus another £100 billion of investment it reckons will be needed over the next 25 years.
A Labour government might try to expropriate the water, gas and electricity companies for less than their true worth, though that would cause untold damage to the UK as a destination for foreign investors. And renationalising utility companies would put infrastructure at risk. With the government as owner, bills would be political issues. What Prime Minister clinging on to a slender majority would agree to raising household costs and risking his or her own career, even if the hike were urgently needed to finance investment?
Seizing back privatised companies for ‘the people’ would hit ordinary voters in their pockets through their pension funds. Many employee shareholders would be stripped of their small investment pots. There is no guarantee bills would come down or that customers would be treated any better.
Labour has not elaborated on how it might run businesses more efficiently. For proof that state control does not equal good management, we need look no further than the bailed-out banks. Some of the worst gouging of customers went on at RBS and Lloyds after they had been put under government direction.
Even so, it is easy to see why nationalisation seems superficially attractive. Water companies that have used offshore tax havens and incurred big pollution fines have tarnished themselves and their industry. Centrica, whose chief executive blamed a price cap for thousands of redundancies, is rightly unloved.
For enlightened capitalism to work, there need to be enlightened capitalists in charge, but these have been in too short supply. The biggest irony is that business only has itself to blame for the threat it faces from Corbynism.
Labour avoids putting a price on nationalisation... it’s very costly indeed