John McDonnell, speaking at the Labour Party Conference 2018 in Liverpool, today took the party back 100 years when the party first introduced Clause IV. The Adam Smith Institute responds to the Shadow Chancellor’s Chavez-style commitment to nationalise industry, force executives out of jobs at Britain’s utility companies utilities, and to force companies to move to offer share ownership.
Sam Dumitriu, Head of Research at the Adam Smith Institute, said of the forced share ownership plan:
“What is startling about Labour’s plan is just how easy it is to avoid. The reform only applies to public companies listed in the UK. The Shadow Chancellor would have no power to force private companies or foreign-listed companies to do the same creating a powerful incentive for British companies to go private or list in New York or Frankfurt instead of London.
“It would discourage fast-growing startups from going public too, starving them of investment and potentially leading to worse governance. While the 250 employee threshold creates an incentive for firms to outsource and use contractors instead.
“The plan would cut investment too. Firms are less likely to invest if up to 10% of their shares are at risk of re-appropriation. As dividends are capped annually at £500 per worker (the rest going to the state) it would have the unintended consequence of rewarding labour-intensive firms and punishing capital-intensive firms creating low-productivity, low-wage economy.
“The only workers who might benefit are the corporate lawyers and accountants who will help companies avoid McDonnell’s plan altogether.”
Matt Kilcoyne, of the neoliberal think tank the Adam Smith Institute, said of McDonnell’s remembrance of Labour’s old Clause IV and his recommitment to nationalisation:
“McDonnell's full throated love-in for Labour's old Clause IV risks clawing the UK economy back into the dark days of strife and stagnation.
“The Shadow Chancellor isn’t handing back power to the people, he is planning a raid on millions of Britons' pension pots. Funds invested in our country’s utilities and the record levels of investment that private ownership has brought, are now at risk from a Labour government that intends to appropriate these assets with a partisan parliament setting any price paid.
“The Chavez-style commitment to readvertize jobs at utility firms taken back into state control will make the roles political and take people with years of experience and track records of success away from where they're most needed.
“At least he was honest about what all this would be called: Socialism.”