What is Labour up to?
Labour says it will nationalise Openreach, the part of BT that runs most of Britain’s broadband network, and provide all homes and businesses with free internet. The party says it will borrow £15billion, on top of £5billion already committed by the Government, and use it to subsidise the rollout of fibreoptic cables nationwide by 2030. Labour proposes to compensate BT shareholders by paying them with government bonds – effectively IOUs that pay interest. Openreach has expanded its fibre rollout in the past two years, but critics have long accused it of moving too slowly.
Labour says it will cost an extra £15 billion, which it plans to borrow. But it may end up having to pay the same amount again for Openreach, with the party saying Parliament would decide the final amount paid to BT shareholders. Any investors who feel they could be left out of pocket might decide to take a Labour government to court. Philip Jansen, BT’s boss, said the plan could easily end up costing £100billion in total. Labour also claims broadband maintenance would cost only £230million a year. But City analysts put the real cost at up to £900million.
BT has more than 800,000 retail investors – many of whom would have snapped up shares following
BT’s privatisation by Margaret Thatcher’s government. If Labour does not pay the full market value of Openreach, shareholders with a stake in the company could be left out of pocket. Any falls in BT’s share price will hurt them as well – as much as £715million was wiped off the firm’s value at one point yesterday. BT’s share price is now below £2 – compared to a peak of more than £5 in 2015.
And pension funds?
BT is a FTSE 100 company, meaning most big pension funds have cash invested in it on behalf of millions
of workers and pensioners. A huge number of so-called tracker funds that follow the FTSE will also hold shares. All of these investment funds – and the retirement plans they help support – could lose out if BT’s shares fall or if Labour does not pay a fair price. City analysts have also warned that BT may no longer be able to afford its £1.5billion annual dividend to shareholders if Openreach is nationalised. BT’s own pension pot would also be affected. The £58billion retirement scheme currently has a £6billion deficit, which the company has agreed to pay down by 2030. This means a Labour government could face a compensation claim if its nationalisation plan threatens efforts to eliminate the deficit.
Yes. In 2009, Australia’s National Broadband Network aimed to give 93 per cent of the population so-called ‘gigabit’ connections – a similar speed to what Labour wants to deliver. But the vast project has suffered from a litany of complaints. It was originally forecast to cost £29billion, but that has ballooned to £40billion.