Labour's nationalisation plans have grabbed the headlines. While critics reject the ideas as ‘old labour’ and a return to the past, Labour’s plans to ‘take back’ key public services: water, energy and Royal Mail, appear to have garnered support from a significant proportion of the public. A frustrated travelling public are particularly supportive of re-nationalising train franchises: a YouGov poll taken shortly after Labour announced its manifesto found that 60% were in favour of re-nationalising the railways.
Other plans have more direct implications for investment companies.
Labour’s tax plans include expanding the existing UK stamp duty on shares into a broader financial transaction tax. This could affect non-UK companies which currently do not have stamp duty levied on purchases of their shares. It would also affect the costs of companies trading portfolios in affected instruments.
Labour claims the tax could raise more than £5 billion a year, £26 billion over the course of a five year parliament. Critics suggest the impact will be to shift much of the relevant activities outside the UK tax net.
Interest has also been piqued by Labour’s policy that would require large companies to reserve at least one third of the seats (a minimum of two) on their boards for workers. Both public and private companies, with more than 250 staff, would be legally bound to give employees “a real say” in how companies are run.
Some may suggest Labour is re-treading old ground. These proposals are not new or unique. Labour’s plans for a financial transaction tax reflect ideas advanced in the 1970s by James Tobin. More recently, Ed Miliband espoused a return to nationalisation of the railways; while Theresa May promised, in 2016, to shake up corporate governance by having employees represented on company boards.
Labour is also focusing on strategic investment and spending.
Under Labour, new public bodies – The Strategic Investment Board (SIB), the National Investment Bank (NIB) and the National Transformation Fund (NTF) – would be created to finance infrastructure projects, research and innovation and funding to small businesses. The Bank of England (BoE) would be required to ensure that the commercial banks provided adequate funding to ‘productive sectors of the economy’.
A regional dimension is introduced under the plans by the location of these entities. The SIB, the NTF and the NIB would be in Birmingham. The BoE Monetary Policy and Financial Policy Committees would also be relocated to Birmingham and the NTF would have regional offices. The Financial Policy Committee would also have representation from each region.
The proposals represent a distinct shift from the approach of ‘new Labour’. They also offer a very different approach to the way the state works with the City.
They may also not be the end of Labour's ambitions. John McDonnell, Shadow Chancellor, is reportedly reviewing options to introduce a four-day working week. Another eye-catching, if confirmed, initiative to grab attention and challenge received wisdom of established economic policy.
But we should all take note: these plans could be shaping the environment in which investment companies are operating in the years to come.