Current polling suggests that there is close to zero probability of a Labour government with a mandate, or a sufficient mandate, to implement its planned programme of nationalisation – of rail, water, the Royal Mail, gas and electricity suppliers and grids, and of BT Open Reach. Shareholders regard the prospect of their policies being implemented as so unlikely that Labour’s BT announcement moved the share price by a mere 1 per cent.
But there is still an important issue here: the British people appear to share Labour’s negative view of large swathes of British business, mainly our utilities – even those who are not planning to vote Labour. Recent polling shows 56 per cent are in favour of rail renationalisation, with 22 per cent against; nationalisation of water is backed by 50 per cent, with a quarter against; renationalisation of energy companies backed by 45 per cent, and only 29 per cent object.
Public grievances about the conduct of utilities are often justified. These companies exploit their near-monopoly status, and the regulators who are supposed to check their excesses are apparently impotent. There are egregious executive pay awards unrelated to performance; taxes dodged through financial engineering and the use of offshore havens; customers taken for granted; telephone helplines that are never answered; charging scams; trains that run late, if they ever arrive at all.
Yes, these may be caricatures – but there is enough truth in them to have created a market for Clause 4 socialism among millions of non-socialists.
Nonetheless, I suspect that the centre of gravity of public opinion is closer to my own instincts and experience, largely non-ideological but wanting to do what works. In government, I was responsible for setting up two state-owned banks, the British Business Bank and the Green Investment Bank. But I also supported the creation of new "challenger banks" in the private sector to weaken the stranglehold of the big four.
I also oversaw one controversial privatisation – of Royal Mail – while maintaining a nationalised Post Office, which supports a network of socially valuable branches nationwide. The coalition government in which I was a cabinet minister was accused of selling the last bits of the "family silver", but we were also responsible for one, massive, accidental nationalisation: Network Rail was reclassified overnight by the government statistician as fully in the public sector. The fact that the railways are as disappointing as ever tells us something about the limited capacity of state ownership to transform the quality of service.
The non-ideological supporter of nationalisation will start from the entirely reasonable notion that there is a wider public interest than that of the private owner. The whole purpose of utility regulators is to establish that wider interest on a long-term basis. The public mood, by contrast, is fickle. The popular idea of price caps for energy conflicts with the aim of long term investment to ensure secure supplies and the even longer term aim of environmentally sustainable energy. Cheaper water rates may be at the expense of investment in reservoirs and stopping sewage outflows into rivers.
Vested interests also colour views of the public interest. The enthusiasm of the rail unions and the Communication Workers Union for public ownership relates less to consumers than to the views and desires of their members. The CWU wants to stop the competition which is driving down the cost of courier charges and rail users are all too familiar with disruptive strikes over pay and conditions.
Nationalisation is also advocated on the basis that profits can be invested rather than passed back to shareholders. But the long experience of nationalisation in the UK is that in practice it is investment which suffers. The Treasury has to approve new investment against competing claims on government borrowing and historically has been conservative in protecting the government’s balance sheet from the risk of loss of investor confidence. And its political bosses will invariably choose investment in hospitals and new schools over train signalling equipment and sewage farms.
When the coalition government was privatising the Royal Mail, our key concern was that successive governments had starved the state-owned company of capital, frustrating its need to move from the dying business of letters to the growing business of parcels. At present there is an unusual situation where the government is too reluctant to borrow at low interest rates. But the creation of a new generation of nationalised industries, competing for capital with other needed public investment, will bring that feast of cheap borrowing to a quick end.
It is a great pity that serious questions about ownership and control within a modern capitalist economy are being answered through the tired and dated solutions of the 1940s. There is more than a whiff of nostalgia for the Fat Controller issuing instructions to Thomas the Tank Engine and Postman Pat delivering letters to the parsonage at the end of the country lane.
The easy slogans of electioneering, for now, obscure light from being shed on some much more interesting utility models like the mutually owned Welsh Water, which is run commercially but without shareholders. Its assets and capital investment are financed by bonds and retained financial surpluses, which are in turn there to insulate its customers from unexpected price rises. There are also lots of creative ideas for broadening company ownership and there is a vigorous debate on reforming corporate governance and to strengthen the influence of stakeholders other than shareholders. The role of the state is not a binary choice; sometimes the state can be part of publicly owned bodies, operating alongside private enterprise, catalysing innovation and instilling long-term thinking where the market alone would achieve neither.
Meanwhile, the modern commanding heights of the economy are the overseas-owned data companies. Labour has little to say about this new economy, other than to demand more tax from it to finance free broadband. The party's manifesto does not explain how the avowedly international Google and Amazon will take their instructions from a London politburo.
Whoever wins the election must take on board the disillusion of the public with private utilities, and with regulators who seem to have been captured by the industry. We need concrete proposals toughen up regulation so that they are better at rewarding good performance and better at cracking down hard on abuses of monopoly positions.
But in making these reforms, government must look forward, providing more choice and accountability to consumers and anchoring modern capitalism in long-term investment over short-term profit. A simple reinvention of old nationalised industries might be good politics but it is poor economics: it will cost a great deal and achieve very little.
Sir Vince Cable was leader of the Liberal Democrats between 2017-2019 and is a former secretary of state for business, innovation and skills