Labour's broadband pledge: Why you should take the party seriously on nationalisation

Labour’s plan to take BT Openreach into public ownership and provide free broadband for all is the policy bombshell of the election campaign so far. The sharp initial fall of BT’s share price brings to mind that day in September 2013 when Ed Miliband unveiled his energy price freeze and the shares of Centrica (the owner of British Gas) took a bath.

It is rare for an opposition policy to set the pace like this, and on the surface surprising. Miliband at least enjoyed a lead in the polls and was in 2013 a fair bet to win an outright majority in parliament. Jeremy Corbyn’s Labour has barely ever been in that position, and for most of his time as opposition leader his industrial approach has been a matter of curiosity at best.

Indeed, it was not long ago that you could dismiss the Labour urge to nationalise things as just that: an unthinking urge motivated by little more than a problem with the word “profit.” Nationalisation was the policy flagship sailing back to the 1970s—the perfect epitome of Corbyn’s nostalgic hostility to the modern world. This acolyte of Tony Benn—the last industry minister with serious plans to take private business into public ownership—had never accepted the Thatcher revolution, and apparently wanted to return to the days when the local authority ran your water, the Post Office somehow controlled the phones, and the consumer came reliably last.

I happened to be working in Downing Street during the last election. While the officials dutifully went through the motions of examining the Labour manifesto, nobody seriously thought they would have to do it—including, one suspects, in the Labour Party itself.

If that was ever a tenable position, it is not any more. Labour has put serious work into its policy. Arguments about valuation have found their way into the public domain, in what looks like a carefully-orchestrated softening-up of current owners and an attack on their call to receive market value. Shadow chancellor John McDonnell has become more nuanced, singling out parts of the regulated utilities that are right for public ownership, and others where capitalism is presumably just fine.

Read its pamphlet on energy networks, and you can tell that Labour has brought some regulatory expertise to bear. It recounts, almost in sorrow, the sheer difficulty of the regulators’ job in trying to rein in the “gaming and profiteering” intrinsic to a system of privately-owned natural monopolies. Cleverly, the pamphlet cites influential recent work by Citizens Advice into £7.5bn of supposedly excess profit.

The reason I often hark back to Miliband and his—rather flawed—energy price freeze was that it marked a watershed moment in the public debate. Miliband was then derided as an ignorant socialist, but his policy was popular, and it dawned upon the Conservative Party too that it is not always wrong or politically bone-headed to stand in the way of untrammelled capitalism. Not long after, George Osborne helped to bring about a cap on high cost credit, almost obliterating that sector. In 2017, the Tories put an energy price cap in their manifesto, and a year later they actually delivered it.

It is always a mistake to look only at the party behind a policy when judging its effect. During my spell in Downing Street, there were frequent anguished conversations about what stance a Conservative administration needs to take, in light of Labour’s assault on the profits of privatised companies. Of course, no one wanted to consider nationalisation, but it forced the Conservatives into a dilemma—how do you acknowledge the concerns of the voting public, without conceding the case behind the opposition’s answer? You can see some of the consequences in how Michael Gove, as secretary of state in Defra, attacked the water industry last year, or Kwasi Kwarteng, energy minister, has mused openly about National Grid’s role operating the energy system. The current Foreign Secretary, Dominic Raab, last year called for BT and Openreach to be split apart.

All bold ideas, but capable of being portrayed as half-measures by a ruthless opposition. Nationalisation itself is more popular with the public than most of business realises—one YouGov poll found a majority in favour of publicly owned water, rail, postal delivery, and energy.

But not, one should note, telephone and internet companies. This points to several risks for Labour. First, is this now a giant step too far? The public can imagine our lakes, pipes and railways as nationally owned, perhaps because of their history—but not something as ultra modern as gigabit broadband. There is still huge scope for innovation and competition here, and that is what the private sector is for.

Second, can they afford it? Labour may relish the fight about what nationalisation may cost, but arguing in public runs the risk of a spokesman looking foolish before an expert far better placed to know the answer. What if the true cost of running nationalised broadband is not £230m but a high multiple of that—will they want to take money from other budgets? Third, do they understand the damage they may cause to the private sector? Perhaps this is not a factor that keeps the Corbynistas awake at night, but the last thing they need is for customers to receive letters explaining that their provider doesn’t think they can offer the service any more.

For about 40 years, the only time companies were nationalised it happened by accident, not design. The voting public ought to understand that Labour is very, very serious about this. I suspect the Treasury officials are reading up on this with a much more serious face this time. But none of this proves the policy is actually deliverable.

 

Giles Wilkes advised Theresa May on industrial and economic policy, and prior to that advised Vince Cable in the Department for Business, Innovation and Skills. He now spreads his time between the Institute for Government and Flint Global but writes here in a personal capacity