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Here's why Labour doesn't need to explain how it'll pay for nationalisation

The party has provided costings for all but one aspect of its manifesto. Here's why.

Labour’s manifesto includes a significant expansion in the size of the state, with the water, energy, mail, rail and bus companies all set to be re-nationalised. (The energy companies will only be partially nationalised but that’s a topic for another time.)

What seems to be confusing a lot of people is that Labour has not included any of those nationalisations in its accompanying document explaining how the manifesto will be paid for.  Here’s why.

Under Labour’s fiscal rule, it has to balance day-to-day spending and aim for an operational surplus by 2022. That is to say, it can’t spend more on the regular functions of government than it takes in through tax. But it can borrow for infrastructure spending. To put it in real terms – Labour can’t spend money it doesn't have to pay doctors and nurses, or teachers. But it can borrow money - up to £250bn until 2027 - to build a new school or hospital.

Taking something into public ownership counts as infrastructure spend – just as Gordon Brown’s nationalising of the banks during the financial crisis  did – under Labour’s rule, which is why the party doesn’t need to provide a revenue stream to do so. Just as spending on a new hospital secures a capital asset, so does nationalising something.

The counter-argument is that infrastructure spending creates jobs and improves productivity, but nationalising something merely changes whether those jobs are private or public. The Labour leadership’s view – and the one that would be tested if they won – is that by putting these assets into state hands, you unlock higher productivity and better job growth. (And, in the case of water companies, you gain tax revenue, as Labour’s shadow chancellor, John McDonnell, believes these companies are engaging in tax avoidance.)

And that’s why Labour hasn’t provided a cost for its renationalisation programme – and why, under its own fiscal rule, it doesn't need to.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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Scotland's vast deficit remains an obstacle to independence

Though the country's financial position has improved, independence would still risk severe austerity. 

For the SNP, the annual Scottish public spending figures bring good and bad news. The good news, such as it is, is that Scotland's deficit fell by £1.3bn in 2016/17. The bad news is that it remains £13.3bn or 8.3 per cent of GDP – three times the UK figure of 2.4 per cent (£46.2bn) and vastly higher than the white paper's worst case scenario of £5.5bn. 

These figures, it's important to note, include Scotland's geographic share of North Sea oil and gas revenue. The "oil bonus" that the SNP once boasted of has withered since the collapse in commodity prices. Though revenue rose from £56m the previous year to £208m, this remains a fraction of the £8bn recorded in 2011/12. Total public sector revenue was £312 per person below the UK average, while expenditure was £1,437 higher. Though the SNP is playing down the figures as "a snapshot", the white paper unambiguously stated: "GERS [Government Expenditure and Revenue Scotland] is the authoritative publication on Scotland’s public finances". 

As before, Nicola Sturgeon has warned of the threat posed by Brexit to the Scottish economy. But the country's black hole means the risks of independence remain immense. As a new state, Scotland would be forced to pay a premium on its debt, resulting in an even greater fiscal gap. Were it to use the pound without permission, with no independent central bank and no lender of last resort, borrowing costs would rise still further. To offset a Greek-style crisis, Scotland would be forced to impose dramatic austerity. 

Sturgeon is undoubtedly right to warn of the risks of Brexit (particularly of the "hard" variety). But for a large number of Scots, this is merely cause to avoid the added turmoil of independence. Though eventual EU membership would benefit Scotland, its UK trade is worth four times as much as that with Europe. 

Of course, for a true nationalist, economics is irrelevant. Independence is a good in itself and sovereignty always trumps prosperity (a point on which Scottish nationalists align with English Brexiteers). But if Scotland is to ever depart the UK, the SNP will need to win over pragmatists, too. In that quest, Scotland's deficit remains a vast obstacle. 

George Eaton is political editor of the New Statesman.