John McDonnell vowed to take Britain into a ‘new era’ of hard-Left government today as he set out plans to nationalise utilities at below the market rate.
The shadow chancellor fleshed out his goal of bringing rail, energy and water back into public ownership, insisting that parliament – not the market – would decide how much shareholders would be paid.
Mr McDonnell also signalled that Labour could borrow tens of billions to end PFI contracts to provide public services, reiterated Labour’s determination to enforce caps on high pay, and vowed to strengthen unions.
John McDonnell vowed to lead Britain into a ‘new era’ as he set out a hard-left agenda
Mr McDonnell was congratulated by Jeremy Corbyn after delivering his speech to conference in Brighton today
But business reacted with alarm at the vision set out in the Corbyn ally’s speech to Labour conference in Brighton – warning that it would send investors ‘running for the hills’ and leave the economy crippled.
Hailing the party’s better-than-expected performance on June 7, which saw the Tories stripped of their overall majority, Mr McDonnell said: ‘We have proved that we are an effective campaigning Party.
‘We now have to prove that we will be an effective governing party. A Government that can set the political agenda for a generation.
‘If you study the history of our Party, you will see that it’s always been the role of Labour Governments to lead our country into each new era.’
Mr McDonnell siad it was a ‘scandal’ that PFI deals will see nearly £200 billion paid to private companies from the public sector over the next few decades.
Under Jeremy Corbyn’s leadership, Labour has already promised not to sign any new PFI deals.
But Mr McDonnell won loud applause as he told delegates: ‘We will go further. I can tell you today, it’s what you’ve been calling for. We’ll bring existing PFI contracts back in-house.’
The PFI scheme was introduced in 1992 by former Conservative prime minister John Major, but was stepped up significantly under Tony Blair’s administration, when it was used to fund the construction and operation of public sector infrastructure like hospitals.
Veteran left-winger Dennis Skinner said Labour should be honest about its plan to fund a spending splurge by borrowing billions of pounds
Mr Skinner was cheered to the rafters by delegates at the conference as he praised Labour’s hard-left programme
Unite chief Len McCluskey, one of Mr Corbyn’s closest allies, used his speech to taunt ‘traitor’ moderate MPs and insisted Labour had won the election
Under PFI, a private sector consortium funds, builds and maintains a facility on behalf of a public agency, then receives payments over the term of the contract, typically lasting 25-30 years.
The scheme has led to complaints that the NHS and other public bodies are forced to pay many times the original value of the property over the course of decades, while the contracts are frequently sold on by the original consortium.
John Appleby, chief economist at health charity the Nuffield Trust, warned that buying out PFI contracts would ‘cost a lot of money’.
‘Of course, it will cost a lot of money to do this. A big question is, is that an opportunity cost worth bearing? There are plenty of other things that we may want to spend our scare health money on,’ he told BBC raido 4’s World at One.
‘In the NHS in England, it is paying around £2billion a year in repayments, and they will peak in about 2028, 2030.
‘And I suppose if you add those up from now to the end of those contracts – the contracts end at different period – we could be looking at something like £56billion by 2048 in terms of payments.
‘That’s a huge figure of course. That’s getting on for half of what we spend on the NHS today.
‘Of course, taking these back into public ownership, as it were, doesn’t come free. And the money would have to come from somewhere, either taxes or borrowing or reprioritising other public spending.’
Earlier, veteran left-winger Dennis Skinner told the conference that Labour should be honest about where it would get the money to pay for a spending splurge.
‘We will borrow the money!’ he told activists to cheers.
Mr McDonnell fleshed out his plans for nationalising swathes of utilities – which experts have said will mean borrowing tens of billions of pounds more.
‘Building an economy for the many also means bringing ownership and control of the utilities and key services into the hands of people who use and work in them. Rail, water, energy, Royal Mail- we’re taking them back,’ he told activists.
Earlier, he was pressed on whether the government was ready to pay market value for the companies that are currently providing services. But he insisted parliament would decide how much would be paid by the government.
Business leaders voiced alarm at the hard-left plans in Mr McDonnell’s speech.
CBI director general Carolyn Fairbairn said it would send companies ‘running for the hills’.
‘The shadow chancellor’s vision of massive state intervention is the wrong plan at the wrong time,’ she said.
‘It raises a warning flag over the British economy at a critical time for our country’s future.
‘Business and politicians share a determination to create a fairer society in which everyone benefits.
‘But the trickle of stalled investments caused by Brexit uncertainty could become a flood if these plans were to become reality.
‘This would threaten the living standards of the very people that need help, from pensioners to students.
‘Forced nationalisation of large parts of British industry will send investors running for the hills, and puts misplaced nostalgia ahead of progressive vision. Where Labour has engaged with business – from Brexit and skills to infrastructure and innovation – solutions have been found to deliver an economy that is both more prosperous and fairer.’
Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said: ‘Business communities around Britain will welcome Labour’s recent efforts to deepen engagement on the big issues around economic growth, trade and Brexit.
‘However, with the UK’s departure from the EU on the horizon, businesses will be concerned by the Shadow Chancellor’s proposals for widespread and deep intervention across the economy. Proposals to nationalise key industries would put business investment in the deep freeze at precisely the time that it is needed most.
‘While we can agree that we want a productive and innovative economy, and better infrastructure, the role of government is to get the fundamentals of the business environment right – not to direct every aspect of economic life in the UK.’
In his speech, Mr McDonnell also announced plans for a cap on credit card interest, which would limit total charges to 100 per cent of the original amount borrowed, as a means of helping three million people in persistent debt.
He called on the Government to apply the cap in the same way currently used with payday loans, adding: ‘If the Tories refuse to act, I can announce today that the next Labour government will amend the law. You can call it the McDonnell amendment.’
And he announced plans for a Strategic Investment Board, made up of the Chancellor, Business Secretary, Governor of the Bank of England and the new National Investment Bank, to channel funding into keeping Britain up to speed with the ‘fourth industrial revolution’.
The shadow chancellor was cheered as he confirmed that a Labour government would scrap university tuition fees, overturn Conservative trade union legislation and nationalise rail, water, energy and the Royal Mail.
Buoyed by Labour’s performance at the June 8 general election, Mr McDonnell said that the party was ready to be ‘a government that can set the political agenda for a generation’.
Jeremy Corbyn pictured touring stands at the Labour conference in Brighton today