How workable - and how expensive - might Labour's renationalisations be

[TrueBlueTerrier]

https://www.theguardian.com/politics/20 ... t-benefits" onclick="window.open(this.href);return false;

John McDonnell says taking water, energy and rail back into public ownership is a step forward, not back. But questions remain over costs and long-term benefits

Labour has outlined plans to bring the rail, water and energy supply industries back into public ownership. Royal Mail will also be nationalised as part of a manifesto pledge to reverse some of the high-profile privatisations pushed through by the Conservatives in the 1980s and 90s, and by the more recent coalition government. Shadow chancellor John McDonnell brushed aside concerns that it would be a step back to an era when nationalised industries were characterised by lack of investment, labour disputes and poor services. Nonetheless, questions remain.

How much will it cost?

Buying National Grid, which runs the UK’s energy transmission network, would cost £38bn based on its current capitalisation, though that includes its US business, which the government presumably wouldn’t want. The six power networks and four gas networks – separately owned entities that look after local power and gas – are valued at £60bn, but Labour has stressed any nationalisation programme for energy would be a gradual process.

Nationalising 32 water companies in England and Wales will also be costly. The water regulator, Ofwat, puts the capital value of the industry at £69bn.

For Royal Mail, Labour says it would acquire enough shares to restore majority public control. Buying 50.1% of it would mean an investment of just over £2.15bn at current share price.

The rail industry will cost nothing, because track and station owner Network Rail is already state-owned. That leaves the train franchises, which the state just could take over when franchises lapse.

Will it increase the public debt?
Economists Jonathan Portes of King’s College London and Tony Yates of Birmingham University jumped to McDonnell’s defence when he said the policy wouldn’t add to Britain’s debt burden. Unlike the nationalisations of failing industries in the 1930s and 1940s, Railtrack in 2002 and the banks in 2008, Labour’s targets are thriving. It may seem like an accounting sleight of hand, but the cost of privatisation would be balanced by the value of the asset acquired.

Any practical difficulties?
Regional water franchises were sold, not leased, so Labour would need to buy out those shareholders. It would also need money to buy Royal Mail shares. Cash can be borrowed at ultra cheap rates on international money markets, though, and the government will then take the profit usually passed to shareholders.

McDonnell says he would make shareholders trade shares for bonds: the government would still need to pay bondholders interest, but the profit margin would be shared with consumers. Imagine a privately owned water company has a 10% profit margin. If Whitehall lawyers managed to negotiate 5% annual interest on these bonds, consumers could get the remaining 5%, which the government would distribute through lower bills.

Plans to renationalise energy transmission companies are less clear. The manifesto says Labour will “regain control of energy supply networks through the alteration of operator licence conditions, and transition to a publicly owned, decentralised energy system.”

This is likely to be a more organic process, whereby the government funds municipal networks that will take over the National Grid on an area-by-area basis. In addition, the government will support a new breed of local supplier to compete with the big six retailers of power that include Centrica, E.ON and EDF. This part is uncosted for now.

Any long-term gains for us?
Labour says it will “cut household bills by £220 a year”. But the process will be slow as the changes to a complex industry are negotiated. It could take control of the National Grid at huge cost. It could change the firm’s investment policies and promote renewable energy, but this would increase bills, not cut them. A move to municipal ownership of power lines and local generation could reduce bills, but only after much investment.

Buying water companies and Royal Mail could realise a more immediate gain, but this could be eroded by demands from the government to increase investment. Critics also say a Labour government would come under pressure to pay higher wages. Keeping post office delivery centres from closure, which Labour highlights in its manifesto, is a union demand that few voters would consider important.

Will it benefit the taxpayer?
It depends how well the government runs nationalised businesses. Their value could fall if they become loss-making. Academics have found private operators no more effective or efficient than public owners. Money is usually the key. The trains are safer and popular with buckets of public investment.

Labour says Royal Mail has paid out £640m in dividends in three years while closing 10% of delivery offices. As an owner of Royal Mail, the government did much the same: the Treasury took all the surpluses and invested very little in new machinery or processes. And to compete with Amazon an increase in investment would be vital.

[datasaint]

Labour should make all those in the gig economy delivering parcels have a full set of workers rights and make them pay all taxes. That way they couldn't undercut RM as much and we'd get more business.

[jetblack]

Labour should make all those in the gig economy delivering parcels have a full set of workers rights and make them pay all taxes. That way they couldn't undercut RM as much and we'd get more business.

Completely agree.

[heapsy]

This might noit be 100% up to date, but it does give you an idea of who owns RM shares. http://investors.morningstar.com/owners ... ml?t=ROYMF" onclick="window.open(this.href);return false;

The idea that Labour would re nationalise RM might seem great, but it wouldn't be easy. How would funds, including pension funds be compensated? Such an action could cause significant issues on the stock market.

[k979aaa]

This might noit be 100% up to date, but it does give you an idea of who owns RM shares. http://investors.morningstar.com/owners ... ml?t=ROYMF" onclick="window.open(this.href);return false;

The idea that Labour would re nationalise RM might seem great, but it wouldn't be easy. How would funds, including pension funds be compensated? Such an action could cause significant issues on the stock market.

People on here forget £16 billion was stolen from our pension fund so the business could be sold without future accruals (liability's) but we are now left with a pot not worth pissing in and they want a scheme that you bring your own pot to piss in it and even then you may not get what piss you can put into it. But hay the government still has £16 billion and the sale of royalmail £3.5 billion so near £20 billion so can they afford it yes they should only one party has said it would do so LABOUR!

[k979aaa]

Look here http://www.bbc.co.uk/news/business-18157879" onclick="window.open(this.href);return false; Sorry £28 billion.

[RobertT]

You’re forgetting the pension deficit before privatisation!

The government took on £38 Billion in liabilities but only £28 Billion in assets when they took over the funding for the RMPP up to 31st March 2012. They then sold RM for £3.5 Billion, so that’s still a loss of £6.5 Billion!

Our pension up to 2012 is now effectively funded by the taxpayer!

Do you really think RM would ever be able to plug that £10 Billion funding deficit?

The Royal Mail was then tasked with funding our pensions from 1st April 2012 onwards. That ‘pot’ has always been in surplus but is expected to run out due to poor investment choices.

[Tman]

Corbyn has a similar plan to the one used by Trump, namely promise anything that the shallow end of the electorate will see as attractive in the belief that it will bring some votes in.
If you don't get elected it won't matter, and if you do, just bluster about costs, higher priorities and other such tosh as being the reason why there's been no movement on those pre-election pledges.
Clearly old Jezza's going to be in a world of sh*t were he to be elected, and renationalisation of RM really isn't going to be a priority even were it to be politically possible. There never will be a spare £5bn or so to be allocated to something that no-one outside of Corbyn's inner circle or the dogmatic Morning Star sees as in any way desirable.
Just another perfect example of the old toss the bloke talks on a daily basis.

[jetblack]

Just a couple of thoughts :- 1) you only require 51% of the shares to have effective control of a company. Many countries have state controlled companies that are only partially owned by the Govt. (the nations postal service more often than not being one of them), and 2) would the shares allocated to the workforce really need to be bought back by the Labour Governemnt ? JC has talked about various models of worker controlled co-operatives. Could be some kind of a clause whereby the shares are kept within employee ownership when someone leaves.

Anyhow, its all do-able - and at least then we wouldn't be run on the profit maximisation whims of Wall Street and the City. Do you really think Blackrock, a huge New York based fund investment firm (see the Morning Star link) give a monkeys about the pension/sick/other terms and conditions of the humble British postie ?

Would be nice to see this country be the beneficiary of a thriving and profitable industry for once - instead of the usual lame ducks they choose to nationalise when it suits them - I'm looking at you RBS

[k979aaa]

You’re forgetting the pension deficit before privatisation!

The government took on £38 Billion in liabilities but only £28 Billion in assets when they took over the funding for the RMPP up to 31st March 2012. They then sold RM for £3.5 Billion, so that’s still a loss of £6.5 Billion!

Our pension up to 2012 is now effectively funded by the taxpayer!

Do you really think RM would ever be able to plug that £10 Billion funding deficit?

The Royal Mail was then tasked with funding our pensions from 1st April 2012 onwards. That ‘pot’ has always been in surplus but is expected to run out due to poor investment choices.

That is because royal mail took a pension holiday for ten years or more before hand they are not the only firms or so called business to so but one expects they who are the employers should have a duty of care of the employees rights but since they cannot even get this right why should we get taken for a resource that is disenfranchised by corporate greed!