As I have predicted the question "how will you pay for it?" is being asked of Labour.
I have explained that current spending commitments can be paid for from tax revenues: the spend creates the capacity to pay. How is explained here and here.
So the only real question is how Labour will pay for nationalisation. This is the same question, of course, as asking how the banks were bailed out and how £435 billion was found for QE which, among other things, boosted the price of the companies to be renationalised. The answer is neither, directly, cost the taxpayer a penny. The money was created to achieve both out of thin air.
So renationalisation could be done in the same way. Issue bonds for fair value. Make them redeemable in not less than thirty years, and maybe longer. Make the interest rate the very low ones on offer now. In net terms these are likely to be negative throughout that thirty year period. And what is the net cost of renationalisation? Next to nothing. Or less.
Problem solved.
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Having followed your blog for a while, and read Joy of Tax, I felt confident enough to tweet something along these lines earlier today in response to a tweet from a BBC journalist that Labour’s plans were “uncosted”. Thank you.
It’s sad to see how few journalists do anything other than ask “how will they pay for it?”, and how frequently the Beeb “balance” their report of Labour spending plans by rolling out a right wing commentator to say ” ooh, this will hit hard working families”.
I fairness the Beeb asked me on
I was in the Netherlands and it could not happen
For too long Labour has been silent and it is a pity that they hadn’t got all of this out there sooner in some ways but at least they have now had to show their hand and what a hand it is because to do anything else economically is just to go around in circles as we have been doing since 2008.
The current mode of capitalism died in 2008 and its stinking corpse has been polluting economic policy ever since. This manifesto gives it a decent burial at long last.
What they are proposing is fine with me and now I’ve been able to come here and read about it I can be more confident to recommend their manifesto to others.
The only other thing to mindful of is that no one is saying that this should be Labour Government policy in perpetuity. If the policies have the desired effects then those policies will need to change again at some stage when we can say for certain that the economy has/is recovered.
Is it fair to say Richard that Labour has actually listened to you in the end? I hope this is the case.
I think to some extent it has
But I am not worried about the fact I can only guess that’s the case
Next problem, convincing voters while 95% of the press is saying otherwise
Agreed
From reading the comments it seems people are getting the idea how the taking back into public ownership can be done by issuing bonds. The problem as I see it is how do you convince a sceptical public who have been told repeatedly public ownership is bad. Let’s take the railways, BR for many years was known for dirty inefficient service when everyone within the industry knew it was simply due to lack of investment. In fact if you look at all the publicly owned industries you see this story of lack of investment and innovation. One reason I suggest for this fact is that governments saw publicly owned industries as a means of increasing or decreasing public spending dependent on how the economy was doing as a whole. So if the economy was doing well government would allow spending to increase in the publicly owned industries to be followed by cutting back when the economy was doing badly. This is not how any industry should be run and in the end spelt the death knell for publicly owned industries in the U.K. This is why I believe Labour should seek to own only 51% allowing them to develop and innovate as the industries want and not be the play thing who ever is in power. But I also believe a better case for publicly owned industries can be made by pointing out how the market and the need to satisfy share holders holds back many of the privatized companies. That when there’s a real need for more investment such as the railways lacks capacity privatized companies would rather raise prices than put in the investment which a publicly owned company would do. Lastly I would like to end by saying if anyone cares to look back in history quite often it is only through public ownership that many of the things we all take for granted such as clean water ever happen.
BR was probably the most efficient railway in the world in the 70s – and created the HST
But it had lousy sandwiches
The marketing failed
The business didn’t
I agree BR was probably the most efficient railway company in the 70s as most European companies would agree. But the problem is one of perception if you can get the public to believe something is bad,lousy sandwiches to dirty trains it’s very hard to convince people otherwise. And that is the point I was trying to make
public ownership as many benefits which the public are being denied from seeing because they’ve been told repeatedly it’s bad. I suppose it’s only when people experience how bad private companies are that people change their views. Lastly as an example of how public ownership can benefit society I would like to tell you about where I live. Many years ago the Labour council decided to build an entertainment and leisure centre which was very successful. Unfortunately Labour lost control and the Tories and their liberal friends decided to sell it off,this didn’t happen so for several years it was left empty. Then Labour regained power and the centre was reopened and again it’s as successful as previously so public ownership can work.
Agreed
No need to pay anything for the train operating companies – let the leases/operating licenses lapse. In the case of the UK Distribution Network Operators (DNOs) I’d tighten the returns on assets to the point where the “game” becomes much less attractive (Ofgem calls the shots on this). Having a discussion today on Northern Power Grid(prop: Warren Buffet) – the view on the block is that this is a money extraction exercise. Make it more difficult to extract money. The weak bit in this is National Grid’s ownership of US transmission assets raising a quid pro quo possibility. The Chinese (Politburo) might not dance for joy at the propsect of losing UK Power Networks (they keep the lights on in Downing Street amongst other places).
I guess the issue is what constitutes “fair value” – if it was me I’d indulge in a bit of “attitude adjustment” before making offers. Like the bonds idea. Probably plenty of squawking – but I used to get that from the chickens before dispatching them for the pot (well oven/roast etc).
Thank you, thank you thank you! You have given me the missing link.
That is what how I thought that they would do it and I hope that they do.
So – this time they are bailing out the voter from poor service and rip off prices as a result of privatisation. It would be good for the postmen and women to get their final salary pension back too.
Could you pass on your wisdom to Larry Elliott. In his analysis of the Labour Manifesto on the Guardian web site tonight he is still reciting the mantra of ‘tax and spend.’ Also he refers to a ‘sleight of hand’ over the uncosted renationalisation of the public services. I had hoped for better from Larry but in this article he reveals himself as just another orthodox classical economist.
I’ll kick him next time I see him
Please do. But not too hard – he was one for the first in the MSM to acknowledge that the manifesto has real potential.
The Gold Standard was abolished in the UK in 1931 nearly 90 years ago but Larry’s still on Gold Standard rules. I think a million years could pass and he’d still be on them! I think he became prematurely senile at a very early age.
I can assure you he’s not
Nor is your suggestion correct
Richard can you elaborate your assumptions re who would buy bonds at such low rates, or link to the blog you wrote on this previously please.
People are, week in week out, now
And these would be compulsory purchases
Is appropriating someone’s property and offering to pay for it in 30 years’ time, whilst paying negative real interest rates in the meantime, legal under EU law?
You may have noticed we’re leaving
My problem with these is always the same. You say issue bonds to pay for the renationalisation.
Bonds are just a mechanism for money transfer from tax revenues to bankers. If bonds can be issued out of thin air as it were, why not money? Then there is no “national debt”, no interest payments, and finally the government (such as it is), is in real financial control.
If you think I am bonkers, read about the US Greenback and the Bradbury pound.
Bonds can be controlled.
Money cannot be.
Hi Richard,
I’m sure you are busy but I’d really like to read a more comprehensive answer to the question of why bonds but not money. Sorry to ask so general a question but can you explain what it is about bonds that makes them controllable (and by who/what) and what it is about money that makes its creation uncontrollable? I’d have thought there a loads of way to control the creation of money.
Thanks.
Bonds cannot be presented for redemption for the period they are issued for
Cash must be redeemed on demand
So bonds are more controllable
Hi Richard – for more detailed analysis of possible renationalisations check out this link: https://weownit.org.uk/manifesto
“There is a “black hole” in the Labour costings” and “the money has to come from somewhere”, journalists are churning out such statements at a rapid rate of knots this morning. Statements that they could have made about Brexit at any time but chose not to (apparently the £80 billion EU exit fee does not constitute a hole, or maybe its a blue hole which would be OK).
I would simply convert the £435 billion of QE gilts into a renationalisation fund, the amount already forms part of UK debt and would cost us nothing.
We know that Government predictions of deficit and debt since 2010 have been wrong to a significant degree and that Brexit was not costed by Cameron and jet the journos see the Tories as the party of sound finance.
I think that the quality of the journalism emanting from London is now a political issue in its own right but unless the BBC acts people cannot protect themselves from bias and misinformation.
As a license fee payer I have written a formal complaint to the BBC on biaised reporting for the past 2 years. It is the job of journalists to scrutinise the current government and hold it to account on behalf of the public they serve. I am not a Victor Meldrum but can’t stand by and see the unchallenged lies told by the Tories and headline news when a journalist jay walks infront of a car with Corbyn in it. We know the unchallenged lies about Brexit – if enough people complained they would have to do something, especially if we all withdrew our license fees.
I know that two years ago you had close contact with both John McDonnell
And Jeremy Corbyn. I so hope you can all work
together now. They will do well to have you in their corner.
If they don’t win I fear for the future of the UK
I have an open door