John McDonnell vowed to pull the plug on dozens of water bosses today as he unveiled details of Labour’s ‘radical’ nationalisation plans.
In a full-blooded speech to conference, the shadow chancellor said he was determined to claw back power from ‘faceless directors’ and ‘profiteers’ at utility firms.
And he made clear that senior management would be effectively sacked when the government took over – with their jobs readvertised at much lower rates of pay.
The shadow chancellor’s plans also mean current shareholders may not get back their entire stake as a Labour government could make ‘deductions’ on the grounds perceived wrongdoing.
Mr McDonnell’s aides admitted this could in principle be a 100 per cent deduction.
Business groups accused Mr McDonnell of ‘blind ideology’ designed to turn back the clock to the 1970s – warning he would only succeed in wasting huge sums of public money and ‘crack’ the economy.
Launching a consultation on ‘democracy in our public services’, Mr McDonnell said a Labour government would deliver ‘the greatest extension of economic democratic rights that this country has ever seen’.
In a full-blooded speech to conference (pictured), shadow chancellor John McDonnell said he was determined to claw back power from ‘faceless directors’ and ‘profiteers’ at utility firms
He set out details of his plans for the water industry, which would be reorganised under new Regional Water Authorities (RWAs) made up of councillors, worker representatives and representatives of community, consumer and environmental interests.
The new system would ‘put this essential service back in the hands of local councils, workers and customers’, he said.
Under the proposals, all staff would be moved across in the same roles except for senior executives and directors.
Their posts would be ‘re-advertised on dramatically reduced salaries’ that could not exceed 20 times that of the lowest paid worker.
Rejecting accusations that he was reviving the economic policies of the 1970s, Mr McDonnell said: ‘Nationalisation will not be a return to the past.
‘We don’t want to take power away from faceless directors only to centralise it all in a Whitehall office, to swap one remote manager for another.’
Mr McDonnell said there would be ‘unprecedented openness and transparency in how the industry will be managed’.
And he promised: ‘We are ending the profiteering in dividends, vast executive salaries, and excessive interest payments.
‘Surpluses will be reinvested in water infrastructure and staff, or used to reduce bills. Real investment will allow the highest environmental standards.’
Mr McDonnell confirmed plans to put workers on company boards and create Inclusive Ownership Funds to hand 10 per cent of private-sector firms’ equity to employees, who stand to pocket annual dividends of up to £500.
‘After decades of talking about industrial democracy, Labour in government will legislate to implement it,’ he said.
And he announced plans to bring together institutions such as churches, unions and pension funds in a shareholder campaign to put pressure on companies to stop avoiding taxes.
‘We’ll be demanding companies sign up to the Fair Tax Mark standards, demonstrating transparently that they pay their fair share of taxes,’ said Mr McDonnell. ‘So the warning to the tax avoiders – the game is over. Over.’
Mr McDonnell’s speech was well-received by Labour activists – but slammed by businesses
CBI director general Carolyn Fairbairn warned that the result of Labour’s policies would be a drop in living standards for workers and customers.
‘Labour must meet business halfway or they will crack the foundations of this country’s prosperity,’ warned Ms Fairbairn.
‘From renationalisation to dilution of shares, Labour seems determined to impose rules that display a wilful misunderstanding of business. Their policies would immediately reduce the value of shares owned by ordinary people by over 10% and hobble UK ambitions to compete on a global stage. That’s a double whammy for people’s pensions and savings.
‘At a time of great uncertainty, this is no way to build the foundations of competitiveness and productivity that will improve people’s lives.’
A Water UK spokesperson said: ‘This doesn’t answer any of the big questions about the risks involved in a government taking over and running water companies.
‘Since privatisation, the water industry has invested around £150billion to improve services.
‘Bills are roughly where they were twenty years ago in real terms – they are currently around £1 a day – and leakage has been cut by a third since the mid-90s.
‘New proposals aim to cut bills and leakage even further, and investment is planned to increase to £10billion a year.
‘There’s no explanation of how a government-run water industry would match or beat the ambitious plans for the future that we have set out, and there’s still the serious risk that water would be a long way down the list of priorities for government funding, far below health and education.’
Carolyn Fairbairn, director general of the CBI, (pictured earlier this month at a conference on Brexit) tore into Labour’s proposals which she warned would kill off investment and end up costing jobs