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6 October 2017updated 09 Sep 2021 5:20pm

Labour's nationalisation plans ignore some awkward historical facts

It was good old nationalised British Rail that wielded the Beeching Axe.

By Greg Rosen

For many chief executives, the most important political question this past week of Labour party conference has been: “What would the implications be of a Jeremy Corbyn-led government for my business?” 

Barely a year ago, few businesses thought this a question worth considering – because a Corbyn government was an apparent contradiction in terms. But not any more.

Businesses are now scouring Labour’s 2017 manifesto and policy documents for clues as to what might come next, and how Labour’s pledges might be implemented and funded. But while there are some specifics, many aspects are opaque. And the specifics themselves may mislead.

The snap election meant that Corbyn and his team had not yet been able to shift Labour policy formally from where it was in 2015 to where they wanted it to be – with the result that some pledges were deliberately fudged between the two. In other areas, policy was not so much a considered pledge but an aspirational shopping list designed to reassure Corbyn’s political base that his intent was transformative and he had not been “captured” by the political establishment.

The political partnership Corbyn has forged with shadow chancellor John McDonnell gives the latter great sway in the content of that shopping list. It was notable that when McDonnell announced via BBC Radio 4’s Today programme last week that he wanted to bring rail, water and energy back into public ownership, and that Royal Mail “would follow”, few queried the fact construction was absent from both the 2017 manifesto and Labour’s current policy.

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No detail followed. Some speculated that his reference to construction was intended to mean private finance initiative (PFI) contracts, where Labour’s intent to nationalise has been variously interpreted as narrow and wide-ranging.

Either way, there is no obligation on Labour to make its plan clear, or even to have a public plan. Corbyn’s advisers are well aware that Clement Attlee’s 1945 Labour government did little prior thinking on the mechanics of nationalisation. Moreover, there is no constitutional requirement on a government actually to stick to its manifesto.

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The only issue is the operation of the Salisbury-Addison convention. Largely observed since the late 1940s, it means the House of Lords agrees not to delay government legislation that has been promised in the manifesto of a majority government. A majority Corbyn government could, were it minded to do so, simply remove the need for the benefits of the convention by threatening to create more peers, or to abolish the House of Lords.

Given the lack of a requirement on Corbyn and McDonnell to set out in a manifesto what they would do, businesses should focus less on the specific wording of Labour policies and more on the overall political climate in which public policy is and will be framed. If opinion polls show substantial public support for nationalisation, Labour politicians are more likely to be convinced such pledges are electorally as well as ideologically attractive. 

Those with longer memories will recall that Labour (and the Lib Dems and their predecessor parties) opposed the privatisations undertaken by the governments of Margaret Thatcher and John Major, often very vigorously. It was only later that they came to accept them.

While New Labour in government accepted the system of regulated private utilities, it never publicly embraced such a system over a nationalised one. Its case instead was firstly that nationalisation would cost the public purse vast sums in compensation to the business owners, and that this money could otherwise be better spent on delivering more hospitals and schools.

New Labour also argued that regulation could give ministers sufficient control to achieve public policy objectives without recourse to nationalisation.

Arguments for the merit of privatised utilities have centred on the extra investment and consequent modernisation. But in recent years, Transport for London (TfL) has pointed out that it does not need to make a profit for shareholders, and thus “we can reinvest every pound of income in the transport network”. Nationalisers subscribing to the “TFL case” would suggest that investment in utilities could have been even higher had some revenue not been required as shareholder profit. 

The debate over renationalisation has hardly touched on the awkward fact that the track record of nationalised industries does not substantiate the faith placed in them by Labour’s left. Problems on the railways are blamed on underinvestment or mistakes by Railtrack (the private predecessor to Network Rail). That it was good old nationalised British Rail that wielded the Beeching Axe, and that failed to embrace electrification sufficiently in the 1960s and 1970s, is little discussed.

In areas like water, attempts by private companies to build reservoirs have been stymied by local objections, rather than profit-hunting. But such examples are yet to enter the debate. Labour politicians see little reason not to surf the wave of renationalisation enthusiasm, which polls suggest will only help them at the next election.

Greg Rosen is a historian, a director of public policy at Newington and a former Fabian Society vice-chair