A row over Private Finance Initiatives (PFI) shows how bosses are preparing for the possibility of Jeremy Corbyn walking into Downing Street.
And that Labour’s left wing leadership, fearful of a backlash at their policies, is softening the party’s programme to reassure business.
John Laing Infrastructure Fund (JLIF) gave a shareholders’ update this week warning about Labour’s plans for PFI schemes. Shadow chancellor John McDonnell promised at Labour’s party conference to take existing PFI schemes “back in-house”.
If this happened, the giant warned that it would receive only 86 percent of its portfolio value—around £750 million. Within 24 hours its shares fell by 3.8 percent—on top of a 13 percent fall since a record high in September.
And JLIF isn’t the only one. The bosses’ Financial Times newspaper noted that other infrastructure funds with PFI investments have been “experiencing a sell-off since the Labour Party conference”.
Others piled in to rubbish McDonnell’s plans. Construction News, the industry’s house magazine, attacked Labour. And CBI director Carolyn Fairbairn said, “The shadow chancellor’s vision of massive state intervention is the wrong plan at the wrong time.
“Forced nationalisation of large parts of British industry would send investors running for the hills.”
Bosses are right to be worried because they have a lot to lose. PFI schemes mushroomed under Tony Blair’s New Labour governments—and the likes of JLIF have leached billions from public services.
For instance, JLIF owns 30 percent of the PFI scheme at Peterborough and Stamford Hospitals NHS Trust.
Of £212 million in payments made by the trust to JLIF, £80 million went straight into profits before corporation tax. And according to one JLIF financial report, the Guernsey-registered firm paid barely over 2.5 percent in corporation tax on its £43,698,000 in profits.
Faced with losing out, some bosses are looking to pressure Labour to water down its radicalism. They could accept Labour’s long-term infrastructure investment plans—as long as their profits aren’t challenged.
JLIF’s briefing noted that McDonnell’s “statement was subsequently softened by other members of the Labour Party”. Labour has since said it will review the PFI schemes it deems are bad value for money, rather than promise to take them back into public ownership.
This points to a broader problem facing Labour’s leadership. Labour knows that it would face opposition from bosses if elected. So it’s hoping to buy them off by defending the European Union’s neoliberal single market.
The liberal Observer newspaper reported that Labour’s “claim of a day-to-day relationship” with business “is no exaggeration”. “There is a revolving door in Labour’s gleaming offices, with one business representative leaving as another enters,” it said.
But the bosses are more spooked by any real socialist challenge from Corbyn than the Tories’ Brexit problems.
Corbyn began Labour’s general election campaign by attacking the Tories’ “rigged system” that had enriched the bosses at the expense of ordinary people. “If I were Southern Rail or if I was Philip Green, I’d be worried about a Labour government,” he said.
Labour should carry on trying to worry the bosses—not reassure them in the vain hope of winning over their support from the Tories.