Pensions at risk from Labour’s £200bn spend
JeReMy Corbyn’s nationalisation plans could hit pensions and risk years of disruption, economists warned last night.
Labour has unveiled extraordinary plans to bring rail companies, the Royal Mail, water and energy firms and the broadband arm of BT into public ownership.
But the independent Institute for Fiscal Studies yesterday warned of serious adverse consequences if a Labour government failed to pay adequate compensation to the owners of these firms.
Pension funds are one of the main investors in these compadecided nies – and the IFS said that Labour’s plans could leave them out of pocket.
The IFS said that unless owners are compensated up to the full market value, the policy would amount to ‘expropriation of private property’.
The organisation warned: ‘It will be important to provide compensation to current owners at the appropriate market price. To pay more would represent bad value for money for the taxpayer.’
even if proper compensation is paid, it would cost the taxpayer ‘many tens of millions of pounds’.
The party has always said the level of compensation would be by Parliament. The IFS added: ‘Many of the privatelyheld companies are foreignowned. Paying less than their full market value would risk harming the UK’s standing with other countries.’
It said Labour’s radical plans would bring at least 5 per cent of the total UK assets currently held by private companies into public ownership. It would lead to a more than £200billion increase in the assets owned by the public sector and would add over 310,000 to the size of the public sector workforce.
The plans would also bring at least £150billion of debt on to the public balance sheet, on top of the sum paid out to the current owners of these assets in compensation – a sum which could amount to ‘many tens of billions of pounds’.
The institute said: ‘Reorganising the ownership and structure of these industries, while simultaneously achieving the ambitious targets that have been set (for instance the rapid decarbonisation of the electricity and gas grids), risks years of disruption.’
The institute also said it was unclear whether nationalisation would actually improve services any more than greater regulation would.
IFS research economist Lucy Kraftman said: ‘The key question is whether they would be better managed in the public sector, and what nationalisation can achieve that changing the current regulatory frameworks cannot. At least in the short-run Labour’s current plan would
‘Expropriation of private property’ ‘Complex and costly changes’
lead to significant disruption which could easily, for example, lead to a hiatus in progress towards decarbonisation in the energy sector.
‘One should have very clear evidence for the long-term benefits before embarking on such a complex and costly set of changes.’
Today John McDonnell will vow to end ‘rip-off Britain’ as he unveils Labour research alleging that the Tories have cost families nearly £6,000 a year by failing to curb rising bills. He will claim plans to nationalise key utilities and increase wages will make households nearly £7,000 better off each year.
The Conservatives said it beggared belief that Labour was claiming it would cut the cost of living – when it was promising tax rises.