BRIGHTON, England (Reuters) - Britain’s opposition Labour Party set out plans on Monday to nationalize billions of pounds of privately-funded infrastructure contracts, cap credit card interest charges, and get extra cash from large corporations.
It said it would offer shareholder compensation for the contract nationalization.
In June’s election, Labour found more support than expected among voters seeking change after seven-years of Conservative-led government, coming in second. Although no election is due until 2022, it is preparing for Theresa May’s Conservative minority government to fall much sooner.
Under socialist leader Jeremy Corbyn, a parliamentary veteran, and his would-be finance minister John McDonnell, Labour has shifted from the centrist pro-business platform of former prime minister Tony Blair to a more interventionist left-wing pitch.
McDonnell used a speech at the party’s annual conference in the English seaside resort of Brighton to call for a more state-controlled economy, promising to bring so-called “Private Finance Initiative” contracts into public control.
The contracts have been used for decades to fund public infrastructure project using private capital. They have long attracted criticism for inflating costs and channeling public money to shareholders. Successive governments have attempted to reform the process.
“We’ll put an end to this scandal and we’ll reduce the cost to the taxpayers ... we’ll bring existing PFI contracts back in-house,” McDonnell said.
A 2015 parliamentary report said the government owed over 222 billion pounds of charges on PFI contracts spread across several decades.
Labour said shareholders would be compensated in the form of government bonds at a level determined by when the contracts are brought back into public control. They did not give an estimated cost for the policy.
McDonnell also repeated pledges from Labour’s popular 2017 election manifesto to nationalize industries like rail and water.
Business was critical of the approach.
“The Shadow Chancellor’s vision of massive state intervention is the wrong plan at the wrong time. It raises a warning flag over the British economy at a critical time for our country’s future,” said Carolyn Fairbairn, director-general of the CBI business lobby group.
Labour has struggled in recent years to overcome the perception that it is to blame for the effects of 2007/8 financial crisis, which led to a recession, costly bank bailouts and a sharp rise in the national debt.
But McDonnell criticized the Conservatives’ economic track record since they took power from Labour in 2010 and said they were responsible for slow wage growth which was forcing consumers into debt and risking another economic crisis.
He said Labour wanted the financial regulator to impose a cap on the amount of interest payable on credit card debt to help those caught in “persistent debt”.
“It means that no-one will ever pay more in interest than their original loan,” McDonnell said. “If the Tories refuse to act, I can announce today that the next Labour Government will amend the law.”
The Financial Conduct Authority in April proposed a set of less-radical measures to encourage companies to reduce the number of customers in persistent debt.
The finance industry trade body said the FCA had rejected the idea of an outright cap on interest charges. And the government said Labour proposals went too far and would hurt the economy.
McDonnell, who once listed “generally fomenting the overthrow of capitalism” among his interests in the Who’s Who directory of influential people, also took aim at the wealthy, bankers and large corporations.
He said Labour would fund its plans for higher public spending on things like health and education and a large-scale infrastructure investment program by clamping down on tax evasion and making big firms pay more tax.
“To pay for those public services we’ll close the tax loopholes and the tax avoidance scams (used) by the mega rich,” he said.
He criticized the banking system for pumping up property prices and fuelling a “rentier economy”, pledging instead to make sure banks invest in “high value, high productivity” businesses.
“To reconnect the financial sector to the economy of research and development and production, we will transform our financial system,” he said.
Reporting by William James Editing by Jeremy Gaunt