Scottish Daily Mail - - News -

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.

How much?

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.

Share­hold­ers hit?

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.

Sim­i­lar schemes?

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.

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