Yahoo Finance General election news: Ferocious backlash growing against Labour's 'crazy' plan to part-nationalise BT
A ferocious backlash was growing today against “crazy” plans from Labour to part-nationalise BT and give away its broadband services for free.
Shadow chancellor John McDonnell’s claim that it would cost only £20 billion was ripped apart by BT Group’s chief executive who said the true price tag would be close to £100 billion.
Hundreds of thousands of small shareholders took a hit as shares in the company dropped two per cent on the news, while rival TalkTalk was so spooked that it shelved the planned sale of one of its businesses.
And there were questions over who would end up shouldering a huge liability for the pensions owed to hundreds of thousands of former BT employees — a cost currently paid out of revenues from BT’s commercial activities such as selling broadband.
Under Mr McDonnell’s plan — the biggest planned giveaway of the election campaign so far — some of those revenues would cease to flow because he is planning to give away free broadband to millions of homes.
Virgin Media executive James Lusher made his views on Mr McDonnell’s raid on a fellow communications company clear by tweeting an image of a raccoon stealing food from a cat bowl, captioned: “This mine now.”
Former Labour MP Chris Leslie, now standing for the Independent Group for Change, said on Twitter: “Why so coy @uklabour? Why not throw in free SkyTV? Free iphones? Netflix and Xboxes all round? The more fantastical their ‘promises’, the less credible they become.”
Why so coy @uklabour? Why not throw in free SkyTV? Free iphones? Netflix and x-boxes all round?
The more fantastical their ‘promises’, the less credible they become. https://t.co/wLtfoRaGhI— Chris Leslie (@ChrisLeslieMP)
BT Group’s chief executive Philip Jansen said nationalisation of Openreach, BT’s broadband wing, and the subsequent free provision of full fibre services would cost close to £100 billion, pointing out that the taxpayer would lose £5 billion a year in revenues from selling broadband and would have to pay the company’s salary bill, reportedly more than £860 million a year.
Speaking on BBC Radio 4’s Today programme, he said: “It needs funding, it’s very big numbers, we are talking £30 to £40 billion for building, so if you’re giving it away it’s again, over an eight year timeframe, it’s another £40 billion. So you are not short of £100 billion.”
He added: “Remember, the BT group has over 100,000 people working every single day.”
Mr Jansen highlighted the “responsibility” to ensure pensioners did not lose out, saying: “We also have hundreds of thousands of people who used to work for BT who have pensions that they rely on, and we’ve got to make sure we’re generating the returns for those pensioners, and also very, very importantly, for our shareholders, because ultimately they currently own the company.
“So, all I’m really saying is these are very, very ambitious ideas.”
BT shares initially slumped almost four per cent this morning but regained some of the ground to stand at 190p, down two per cent, by mid-morning.
The share price fall wiped nearly £500 million off the company’s value. Small family investors would be particularly affected by nationalisation because the company was one of the first and most popular privatisations of the Eighties.
It now has 829,000 individual shareholders, the vast majority small investors who have shares as part of their personal nest eggs.
Labour has said the pledge would be paid for through the party’s Green Transformation fund and taxing corporations such as Amazon, Facebook and Google, adding it will save the average person £30.30 a month.
Simon French, chief economist at Panmure Gordon & Co, said that interest rates would be forced up if a Labour government paid less than the company’s true value for shares. “If it comes at a big discount then pension funds are taking a big haircut,” he said.
He said Mr McDonnell’s plan to slap a levy on US internet firms to pay for it would cause problems with the American administration.
“One country going unilaterally is unlikely to be successful,” he said. “It’s likely to attract a lot of attention from the White House who will not look favourably on the UK taxing what are principally American companies.”
TalkTalk’s chief executive Tristia Harrison told the PA news agency the sale of its full fibre broadband business, FibreNation, has been put on hold after the Labour announcement.
Asked who would be responsible for BT pensions, Labour sources said the “status quo” would not change because they were already underwritten by the Crown, making clear taxpayers would have to step in if the company could not longer meet its obligations.
Culture Secretary Nicky Morgan said Labour had produced a “fantasy plan”.
Former broadband minister Ed Vaizey said of Mr McDonnell’s plans: “I think they’re sort of crazy really, I think they’re completely unnecessary and I think they’ll achieve precisely the opposite of what Labour intends.
"It will end up costing taxpayers a huge amount of money and I suspect it will delay the rollout of super-fast broadband hugely.”
One industry source said: “Nationalising Openreach and other fibre builders would be a huge distraction to rapid fibre rollout for the country.”
