The costs of Labour’s planned expansion of the public realm – the nationalisation of rail, mail, water, the buses and parts of the energy market – are back in the spotlight again thanks to a report by the Social Market Foundation, which puts the cost of bringing back the water companies into public ownership at £90bn, broadly the same ballpark as the Centre for Policy Studies, £86bn.
Labour disputes both figures, and as I explained before the election, under their fiscal rule, they don’t need to worry about the cost as they are only obligated to balance the books on day-to-day spending, but can borrow as much as they like to finance infrastructure spending. However, you can see why Labour is wary of arguing more explicitly that it will pay for its renationalisation plans on the never-never, as it draws attention to the weakness they picked up during the financial crisis and have still not remedied: their reputation among voters for spending poorly and irresponsibly.
There is also a reasonable case to be made that the actual cost of renationalising an asset is actually zero. But that runs against years of reporting annual profits to the water industry or the buses running into the billions, and it is always difficult to be the political party arguing for the counter-intuitive position.
Labour will be grateful that the Conservatives have chosen to focus on the behaviour of six people at a university campus instead. Nonetheless, they would be wise to take today as a reminder that a sharper rebuttal on the costs of public ownership may be required sooner rather than later.
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