In a keynote speech that was warmly applauded by delegates at the party’s conference in Liverpool, the shadow chancellor pledged that a Jeremy Corbyn led government would nationalise Royal Mail, the railways and the water and energy industries in “the greatest extension” of public ownership in the country’s history.
He also hinted Labour could restore its original “Clause Four” commitment to widespread collective ownership that was discarded under Tony Blair’s leadership.
Claiming Labour was “ready to build the future,” he added: “We’ll be proud to call that future socialism.”
Business leaders warned his “ideological” plans threatened to scare off investors and plunge the economy into chaos. Analysis from the Tories estimated that his proposals could cost households more than £2,000 a year in higher utility bills.
I say the Clause Four principles are as relevant today as they were back then – fair, democratic, collective solutions to the challenges of the modern economy.
In his speech to Labour’s conference, the shadow chancellor said: “It’s time to shift the balance of power in our country.”
He added: “At the heart of our programme is the greatest extension of economic democratic rights that this country has ever seen.”
Vowing to take the water industry back under state control, he promised “a new publicly-owned water system that puts this essential service back in the hands of local councils, workers and customers”.
He added: “Nationalisation will not be a return to the past. We don’t want to take power away from a faceless directors to a Whitehall office, to swap one remote manage for another.”
Details of the plans for the industry showed that staff would keep their jobs “except for senior executives and directors, whose posts will be re-advertised on dramatically reduced salaries capped by our 20:1 pay ratio policy”.
Shareholders would be compensated by being given “bonds” at a value decreed by Parliament, the plans added.
John McDonnell has revealed plans to seize private companies
The shadow chancellor pledged that a Labour government would nationalise Royal Mail
Mr McDonnell point out to the conference that this year marked the 100th anniversary of Labour adopting the Clause Four pledge “to secure for the workers, by hand and brain, the full fruits of their Labour”.
He added: “I say the Clause Four principles are as relevant today as they were back then – fair, democratic, collective solutions to the challenges of the modern economy.”
Mr McDonnell also promsed a widespread extension of trade union power in the workplace, insisting: “Wages will be determined to sectoral collective bargaining.”
Confederation for British Industry director-general Carolyn Fairbairn said: “with Labour’s current proposals, the fallout for the UK, its workers and customers would be a drop in living standards.
“From renationalisation to dilution of shares, Labour seems determined to impose rules that display a wilful misunderstanding of business.
“Their policies would immediately reduce the value of shares owned by ordinary people by over 10% and hobble UK ambitions to compete on a global stage. That’s a double whammy for people’s pensions and savings.
“At a time of great uncertainty, this is no way to build the foundations of competitiveness and productivity that will improve people’s lives.”
She added: “Firms urge Labour to open their eyes and work with them to move forward, rather than blocking progress through blind ideology.”
Adam Marshall, director-general of the British Chambers of Commerce, said: “Let no one be fooled, Labour’s proposals are both a tax grab and an unprecedented overreach into the way many of our businesses are run and will raise serious concerns.”
He added: “The call for wholesale nationalisation could put investment in a deep freeze at precisely the time we want to be encouraging investment in the economy.
“Why would investors here in the UK, and even more worryingly in boardrooms across the world, choose to put a penny into Britain in the knowledge that their shareholdings will be diluted, and their boards will be subject to significant government interference?”
Jeremy Corbyn and John McDonnell attend day two of the Labour Party conference
Analysis by the Tories, based on the economic effect of an energy nationalisation programme in Germany, estimated that average household utility bills would rise by £200 a month.
Robert Jenrick, the Financial Secretary to the Treasury, said: “Labour’s ideological renationalisation plans come at a cost – and that’s to hardworking families’ monthly bills.
“And with Labour putting politicians in charge of the taps and the lights, people would have nowhere to turn when things go wrong.
“Once again Labour have shown they don’t know how to handle the economy and just like last time it’s working people that will pay the price.”
John O’Connell, chief executive of the TaxPayers’ Alliance pressure group, said: “John McDonnell’s plans for higher taxes and more public ownership would mean abject misery for families and businesses.
“Taxes are already at their highest level in nearly half a century, and even more punishment taxes will actually mean less cash for public services.
“The dangerous policy of seizing control of industry by the back door and nationalising everything they can get away with is a sure-fire way to scare off exactly the investment that Brexit Britain will need to thrive.
“Instead of hurting the poorest by undermining public services and damaging the businesses that employ them, McDonnell should embrace policies that will grow the economy by trusting individuals and entrepreneurs to spend their money better than any politician ever could.
“This speech shows that he doesn’t understand how his ideology will hurt people in the real world – and only cares about the failed ideas of the past, rather than helping the taxpayers of today and tomorrow.”