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If you missed John McDonnell being interviewed by Andrew Marr yesterday, I’d recommend watching it – both as an insight into the weird world of Corbynomics, and for the memorable sight of the Shadow Chancellor refuse to specify any up-front cost at all for the mass nationalisations he is proposing.

There are a few questions that arise from his presentation:

How much will nationalisations cost up-front? Marr had a few goes on this one, but McDonnell still wouldn’t be drawn on it beyond the idea that “the price will be set by Parliament”. That’s no answer, and a weak cop-out. If Labour had a majority in the Commons, it would be McDonnell and his colleagues proposing the legislation on which Parliament would vote, and thereby the price which would be set. Why won’t he even lay out the basis on which taxpayers would be expected to take on these huge liabilities?

How much will nationalisations cost in the medium- and long-term? After play-acting about Parliament deciding the up-front cost of nationalisations, the Shadow Chancellor then pretended it doesn’t really matter anyway, on the grounds that “the cost will be covered from the income from those profitable industries”. This is quite a leap – on what basis does he know that a company which makes a profit today in private hands will automatically continue to do so after nationalisation? Even if he doesn’t accept the long history of nationalised industries suffering disastrous inefficiency, one of Labour’s stated reasons to want to nationalise things like rail and energy is to lower the cost to consumers – it’s obviously bogus to claim you can reduce margins and simultaneously maintain profits. So how much does he really expect it to cost on an ongoing basis?

Will Labour really only nationalise profit-making industries? The whole basis on which McDonnell claims nationalisation will (eventually) pay for itself is that the industries involved are profit-making. Does this mean Labour won’t nationalise loss-making industries, or use nationalisation as a tool to rescue companies that are about to collapse? This seems unlikely, given the Labour Party, McDonnell himself, and a variety of other senior Opposition figures routinely call for loss-making or collapsing companies to be nationalised – be they coal mines or steel plants. If, in practice, they do want to nationalise loss-making industries, then McDonnell’s claim that nationalisation pays for itself through profits doesn’t hold – so, to repeat, what will the true cost be?

Will nationalised industries be privatised if they start to make a loss? No doubt he would deny that such a thing could happen under his management, but let’s image for a moment the possibility that, after nationalisation, one or more of the industries he has bought with this unspecified amount of new debt falls out of profit and into loss. If his principle of funding nationalisation through profits really has supplanted his lifelong commitment to using nationalisation to bail out loss-making enterprises, then what would the implications be in this scenario? Would the rail network be privatised again if it started to lose money?

On what basis can he predict state “investment” will systematically generate profits for the Exchequer? The Shadow Chancellor’s justification for a planned £250 billion increase in spending is that – you guessed it – spending money pays for itself by driving growth. He made vague reference to a recent PwC report, but is he really claiming that there’s no such thing as failed projects or wasteful spending? It seems odd that he and Corbyn attack things like Trident on the grounds of cost, claiming they are not “socially useful”, while also making the case that all state spending is inherently profitable in expanding the economy.

If that theory of automatically profitable spending is correct, why is he limiting his ambition to £250 billion? Why not double it to £500 billion over ten years? Heck, why not an extra £1 trillion every year, if it’s going to pay for itself automatically? Is he being unambitious, or is the reality more complex and less golden than he claims?

Will he have the power to overrule his Strategic Investment Board? Pressed by Marr, he was willing to concede that this confident expectation of returns on investment does in fact rest on the money being spent wisely and responsibly. Perhaps aware that some people are a little sceptical that he will be a wise investor, he has pledged to set up a Strategic Investment Board including himself, the Business Secretary, the Governor of the Bank of England, and business representatives “that will direct that investment”. But how much power will the SIB have? Will it be able to overrule or outvote the Chancellor? For example, if the Governor of the Bank, and the business representatives, vote that nationalising rail isn’t a wise use of money, will Labour really abandon the idea? Or will McDonnell ignore them like just so much window-dressing?

What impact does he think these proposals have on private sector investment? While attacking low Corporation Tax, McDonnell complained that the profits retained as a result of tax cuts were not being reinvested. What impact does he think his threats of higher taxes, greater control, and mass nationalisations at arbitrary price have on rates of investment? Does he expect that the people he proposes to squeeze for money are going to choose to invest more in enterprises that he is promising to seize from them if he wins power? For that matter, do his fiscal calculations take into account the deterrent effect on investment that his policies would have if he became Chancellor?

129 comments for: Eight questions for McDonnell

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