LABOUR RISKS ECONOMIC ‘DEEP FREEZE’
Business warning as McDonnell vows to sack fat cats and nationalise firms
LABOUR was at war with business last night after John McDonnell unveiled plans for mass nationalisations, share confiscations and the sacking of highly-paid bosses.
The shadow chancellor used his keynote speech to Labour’s party conference in Liverpool to unveil a ‘socialist’ agenda for business, which critics warned would take the UK ‘back to the dark days of strife and stagnation’.
Dr Adam Marshall, director-general of the British Chambers of Commerce, said: ‘The call for wholesale nationalisation could put investment in a deep freeze at precisely the time we want to be encouraging investment in the economy.’
Mr McDonnell, a self-confessed Marxist, vowed to reset the economy, saying it was ‘undeniable that the balance of power at work has been tipped against the worker’. He brushed aside concerns about the damage a radical set of policies might cause, saying: ‘The greater the mess we inherit, the more radical we will have to be.’
And he warned business not to stand in Labour’s way, saying: ‘Let me make it absolutely clear that the full weight of the Treasury will be used to take on any vested interests that try to thwart the will of the people.’ In a series of policy bombshells, Mr McDonnell:
Announced that water companies would be nationalised, with control handed to regional boards run by councils and trade unions;
Confirmed plans to raise ‘billions’ from business by forcing large firms to hand over 10 per cent of their dividends and shares to workers and the State;
Backed the reintroduction of ‘Clause Four’ of Labour’s constitution, which commits the party to the nationalisation of key industries;
Said fat-cat water bosses would be sacked, with their jobs re-advertised on ‘dramatically reduced salaries’;
Pledged to ban zero-hour contracts, which provide flexible work to about a million people.
But Labour faced an immediate backlash over the plan to force larger firms to hand over 10 per cent of their shares to workers.
Mr McDonnell said workers would gain up to £500 a year from the scheme, with the State raising about £2 billion a year on top. But analysis revealed it would mean £230 billion of shares would be seized from the 350 biggest firms on the London Stock Exchange alone, and the pension funds and savers who own stock would see their investments lose value.
Mr Marshall said: ‘Labour’s proposals are both a tax grab and an unprecedented over-reach into the way many of our businesses are run and will raise serious concerns.’
Clause Four of Labour’s constitution committed Labour to ‘ the common ownership of the means of production, distribution, and exchange’. It was scrapped by Tony Blair in 1995 as a symbol that Labour was abandoning the ruinous policies of the past.
But Mr McDonnell suggested it was time for it to be restored, saying: ‘ The Clause Four principles are as relevant today as they were back then. Fair, democratic collective solutions to the challenges of the modern economy.’
Matt Kilcoyne, of the free market Adam Smith Institute, said: ‘McDonnell’s full-throated love-in for Labour’s old Clause Four risks clawing the UK economy back into the dark days of strife and stagnation. The shadow chancellor isn’t handing back power to the people, he is planning a raid on millions of Britons’ pension pots.
‘Funds invested in our country’s utilities and the record levels of investment that private ownership has brought, are now at risk from a Labour government that intends to appropriate these assets. At least he was honest about what all this would be called: Socialism.’
Stephen Martin, of the Institute of Directors, accused Mr McDonnell of treating business like ‘ the enemy’. He added: ‘ The overwhelming majority of business leaders are as frustrated as anyone about poor wage growth, sluggish productivity, and corporate governance failures. But the answer will not be found in sweeping measures and angry rhetoric.’
A Water UK spokesman said: ‘This doesn’t answer any of the big questions about the risks involved in a government taking over and running water companies.’
Chancellor Philip Hammond said: ‘Labour don’t know how to handle the economy and have no idea what their plans would cost.’
WHEN he listed ‘ fermenting( sic) the overthrow of Capitalism’ as his main pastime in Who’s Who, many people may have thought John McDonnell was joking. His conference speech yesterday proved that he was in deadly earnest.
With a manifesto of which his political heroes Marx and Lenin would surely have approved, the Shadow Chancellor declared war on private enterprise.
He announced a 10 per cent raid on firms with more than 250 employees, compulsory worker representation on company boards and the start of a comprehensive programme of renationalisation.
Add to this his existing plans for punitive corporation and income tax rises, writing off student debt and a ruinous £250billion borrowing spree and you have the recipe for what one leading financier described as ‘Cuba without the sunshine’.
A more accurate comparison would be Britain in the 1970s, when a uniondominated Labour government took Britain to the brink of bankruptcy – with the economy in paralysis and inflation peaking at 27 per cent.
So for all Mr McDonnell’s humbug about ‘a new politics’, we’ve been here before. And we know how it ends – blackouts, rubbish in the streets, the dead unburied and the nation floundering in a sea of debt.
True, to the young and gullible, Mr McDonnell’s vacuous class war rhetoric has obvious appeal. Who wouldn’t want to have their debts wiped, or receive a financial windfall, or have better public services at no personal cost – with only the rich and greedy being made to pay? But it’s all a confidence trick. Our society may not be perfect but it certainly isn’t ‘broken’. Employment is at a record high, more than five million have been taken out of income tax altogether since 2010 and the top one per cent of earners contribute 27 per cent of income tax revenue – the highest ever proportion.
But make no mistake, soaking them with a raft of iniquitous new taxes would prompt an instant flight of capital and talent – and put us straight back into the poor house.
It’s fitting that this conference is being held in Liverpool, former fiefdom of Derek Hatton and Militant Tendency, whose financial illiteracy brought the city to its knees in the 1980s.
If Mr McDonnell has his way, he will do the same to the whole country.