Hammond, McDonnell battle over new CPS report

Yesterday, the Centre for Policy Studies published The Cost of Nationalisation. This new report represents the first independent attempt to calculate the total upfront cost of Labour’s nationalisation plans – a figure which John McDonnell has repeatedly refused to provide.

The report by Daniel Mahoney, the CPS’s Head of Economic Research, estimates that the upfront cost of Labour’s plans – which cover the energy, water, rail and mail sectors, as well as some PFI deals – would be at least £176bn. This would represent around 10 per cent of the national debt, or nearly £6,500 for every household.

This calculation assumes that Labour will restrict its renationalisation of the energy sector merely to the transmission and distribution networks. In the event of a wider renationalisation of the sector, as urged by Jeremy Corbyn, the final total could be up to £306bn.

Appearing on The Andrew Marr Show, John McDonnell dismissed the need for a figure, not least because “Parliament will determine the price”. This suggests that Labour will expropriate these assets at below their market value. But as our report sets out, any such move will have grave economic consequences, which will far outweigh any savings made.

Philip Hammond, responding to the CPS report, said it had exposed Labour’s “fantasy economics”, and shown how their plans would lead to higher taxes for British families. His deputy Liz Truss, appearing on Peston on Sunday, also praised its findings, as did a host of other MPs including Dominic Raab, Andrea Leadsom and Brandon Lewis.

The CPS’s Director, Robert Colvile, also wrote about the report in an op-ed for The Times, which set out why Labour’s current nationalisation plans may only be the start of its ambitions.

Commenting on his report, Daniel Mahoney said:

“Labour refuses to cost its plans for renationalisation, and it’s easy to see why. It would require at least £176bn in borrowing, the equivalent of £6,500 for every household. This would be an expensive gamble with a huge opportunity cost.

“It is also deeply concerning that McDonnell appears to be planning to seize assets below their commercial value by arguing that is it for Parliament to decide the price. If Labour pursued this, business confidence would slump and confidence in the government would plummet. Pension funds would be particularly badly hit, given that they are major investors in the utilities.”

You can find the full report on the CPS website.


Date Added: Tuesday 23rd January 2018