2A84RW0 Openreach Engineer working at a telephone exchange box in West Lothian, Scotland.
BT suggested Labour’s plan severely underestimates the costs of full fibre rollout and warned of the effects of the nationalisation on its huge pension deficit and shareholder base © Alamy

John McDonnell, the UK shadow chancellor, looks like a grandfather from the shires and speaks in tones of gentle reasonableness. This makes the sentiments he expresses all the more shocking — they are those of an angry young Trotskyist.

The news that he has now added to the list of the Labour party’s nationalisation targets the provision of superfast broadband was couched in suitably grandfatherly language. Giving every household the service free of charge was, he said, “about large numbers of children being able to do their homework properly and have the speed of connectivity”.

Mr McDonnell appears to care not a jot how his posturing might halt UK companies putting desperately needed investment into projects that might feature on his smash and grab list, nor how it might spook overseas investors. His interest is only in appealing to voters who, in some cases with good reason, feel that successive governments have failed to look after them. Who, after all, could begrudge all children the tools to do their homework properly?

Logic might suggest that children need food even more than they need the internet. Shouldn’t essential sustenance be free? Shoes, too, are something of an essential. Logic, however, is not applicable when election pledges are being made.

With almost four weeks left before the general election, there will be plenty more ludicrous plans announced from both the main parties. The Conservatives have already jettisoned spending caution to promise an infrastructure splurge, a bonanza for public services and extra cash to keep pubs open. Labour is going to bribe us all into driving electric cars as well as nationalising utilities. Both will be making TV licences for the over-75s free. Old people have votes, don’t they?

Costing these promises is a futile exercise since they come from the world of fantasy politics. Mr McDonnell pulled a number out of his hat as the cost of his broadband plan, but telecoms experts say it errs on the low side by umpteen billion. The gaping hole in the BT pension fund that would have to be filled after its Openreach network division had been nationalised did not seem to feature in the back-of-the envelope costing.

In a recent speech, Nicholas Macpherson, the former permanent secretary to the Treasury, accused the government of “fiscal incontinence”. Labour has just got a more severe bout of the problem. And while the Conservatives may have a degree of understanding about the realities of the risks they are proposing to take with the economy, Labour seems oblivious to them. Suggesting that it would fund its broadband giveaway by taxing the tech giants was a wheeze guaranteed to have Jeff Bezos and his colleagues heading straight to the White House.

That the BT shareprice fell back by just one per cent after Mr McDonnell’s intentions became clear on Friday indicates that investors do not believe he will be able to put the plan into action. They have good reason to be relatively sanguine. The odds against a Labour majority government are lengthening. A lack of enthusiasm for Jeremy Corbyn, the Labour leader, rather than a dislike of the party’s policies, seems to be its biggest problem. Even if Labour were to perk up in the last lap of the election race, and end up as the largest party in a hung parliament, there would be sufficient opposition to prevent it carrying out its more radical proposals.

Nevertheless, while the BT share price held up relatively well, there was some serious fallout from Labour’s announcement. Goldman Sachs put on hold its plans to invest £1.5bn in a broadband network. TalkTalk suspended negotiations to sell a related business. Who knows what other investment plans were shelved as a result or directed to other countries?

Meanwhile, the government’s determination to press ahead with Brexit has already deterred investors from putting their cash into the UK. Even the slightest possibility of a far-left government will make the UK an even less attractive destination for investment.

Ironically, Labour’s broadband plan might just have taken Boris Johnson, the prime minister, closer to winning a majority in the election. There are some people who still feel strongly that the UK should remain in the EU and would like to see a referendum to give the public the opportunity to give its informed consent to Mr Johnson’s withdrawal agreement or else vote in favour of revoking Article 50.

I am one of those, which is why, last week, I resigned the Conservative whip in the House of Lords. However, some who share my desire for Britain to remain in the EU fear the prospect of a Corbyn government even more. The latest reminder of just how red in tooth and claw it would be may have persuaded them to vote for Mr Johnson.

Both parties should realise that any real progress towards the nirvana they are dangling in front of voters depends on having a thriving economy, not driving companies away from the UK.

The writer is a peer and chairs the FT’s appointments and oversight committee

Get alerts on UK nationalisation when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article