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Andy Burnham's nationalisation push could add tens of billions of pounds to Government debt, according to a think-tank.
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push → see → tank
The PM has put increasing public control over industries such as housing, water, energy and transport at the heart of his 'Manchesterism' programme.
However, it remains unclear exactly what that entails, with a taskforce set up to look at options to 'bring down costs for families’.
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that → put → families
A briefing from the Institute of Fiscal Studies (IFS) highlighted that Mr Burnham's rhetoric encompasses a huge range of possibilities from tougher regulation to full nationalisation.
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rhetoric → highlight → nationalisation
The researchers argued there were risks to paying too little compensation for reclaiming control of industries, as it could turn off future investment.
But overpaying might also be a problem as it would 'weaken incentives for other companies to comply with regulation or manage company finances prudently'.
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companies → argue → finances
The IFS cautioned that the Office for National Statistics (ONS) would judge whether any organisations were sufficiently within the Government's orbit to be added to the public sector balance sheet.
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organisations → caution → sheet
Andy Burnham has put increasing public control over industries such as housing, water, energy and transport at the heart of his 'Manchesterism' programme
'
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Burnham → put → programme
Importantly, this means that when it comes to the fiscal consequences of increased public control, there is no clear dividing line between policies through which government takes a formal ownership stake in a company and more ‘'light-touch'’ policy options such as stronger regulation or government-backed loans with conditions attached,' the report said.
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report → mean → conditions
The researchers pointed out that happened in 2015, when housing associations were put on the books - although they were later removed again.
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they → point → books
Once on the balance sheet an organisation's assets and liabilities are included in calculations for the Treasury's fiscal rules - which Chancellor John Healey has vowed to stick to amid signs of nerves on bond markets.
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Healey → include → markets
The Government targets running a surplus in the third year of any forecast by the independent Office for Budget Responsibility (OBR).
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Government → target → Responsibility
The other rule is that debt must be falling as a proportion of GDP in 2029-30, and in the third year of the forecast horizon after that.
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debt → fall → that
Labour switched from the PSND to the PSNFL measure of debt when Rachel Reeves was in No11, allowing more borrowing because it covers a broader range of non-cash assets.
But the IFS said that the PSNFL metric might not help the Government in terms of accounting for nationalisations.
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metric → switch → nationalisations
'First, and most importantly, PSNFL only nets off financial assets, not physical ones,' the report said.
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report → net → assets
'Second, PSNFL broadens the scope not only of assets, but of liabilities too – for example, deficits of funded company pension schemes are included in PSNFL as a liability.
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deficits → broaden → liability
On the assets side, the OBR estimates that close to 90 per cent of the water industry’s assets are physical, including the water mains network, treatment works, reservoirs and other physical water infrastructure.
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cent → estimate → network
'On liabilities, the water industry holds significant debt, including some types of liabilities that score on PSNFL but not PSND (such as Thames Water’s pension scheme, which was in deficit when last valued).
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which → hold → deficit
The IFS said the OBR had estimated in 2023-24 that moving the whole water industry into the public sector could have added £91billion in liabilities to PSNFL, offset by just £12billion in financial assets.
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moving → say → assets
The report also raised questions about running costs for bodies considered part of the public sector.
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report → raise → sector
'For example, Thames Water would reportedly need £2.4billion to keep running until the end of 2027,' the think-tank said.
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tank → need → 2027
Similar costs relate to energy or rail networks, or building more social housing.
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costs → relate → housing
A broad view of public control may consider these running costs – net of income from consumer charges that funds them – part of the fiscal impact of public control.
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that → consider → control
'Where there is a net cost to the public finances, this can be funded like any other fiscal cost: through borrowing, through taxation or through cutting other spending.
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this → be → spending
'
The IFS suggested the Government's fiscal rules might be 'little impacted by one-off borrowing' because they were forward looking.
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they → suggest → borrowing
'However, for any nationalisation or other increase in public control that led to a reclassification of an organisation into the public sector, the government would also inherit any profit or loss that organisation was making on an ongoing basis, and this would affect its performance against the fiscal rules
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this → lead → rules
,' it added.
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it → add → ?
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