Corbyn Energizes Labour, Scares Markets With Free Broadband Plan
Jeremy Corbyn has been trying to shift his Labour Party’s election campaign off the thorny issue of Brexit and onto his radical plans to shake up the U.K. economy. He finally achieved it on Friday, drowning out Prime Minister Boris Johnson’s own media blitz in the process.
The promise to provide universal free fiber broadband by nationalizing BT Group Plc’s Openreach unit dominated broadcasts and sent telecommunications shares plunging. It’s a continuation of Labour’s plan to take control of key utilities, with taxes from large multinational companies -- in this case the likes of Amazon.com Inc. and Facebook Inc. -- helping to foot the bill.
“This is core infrastructure for the 21st century,” Corbyn said at a campaign event in Lancaster. “It’s too important to be left to the corporations.”
It is the biggest new pledge of the campaign so far from Labour, with Corbyn comparing his proposed new British Broadband company to the establishment of the U.K.’s revered National Health Service. It also overshadowed Johnson’s own events, which included the launch of his campaign bus, a pledge to reopen railway lines closed since the 1960s and two interviews with the BBC.
Johnson denounced Labour’s broadband plan as a “crazed communist scheme,” but the danger for the prime minister is that the proposal will cut through with the voters. Lack of broadband coverage, particularly in rural areas, is a popular complaint and the U.K. lags far behind economic rivals including South Korea, Japan and Spain.
The ruling Conservative Party’s own plan is to incentivize private companies to extend their networks -- a revamp of a government program that has been criticized for failing to reach communities across the country.
Labour’s plan sent shock-waves through financial markets, especially after the party’s economy spokesman, John McDonnell, acknowledged it might need the broadband assets of other providers -- including Sky, TalkTalk and Virgin Media -- to make it work.
“We’ll come to an agreement with them, and it will either be via an agreement on access arrangements, or working alongside us, or if necessary, yes, they can then come within the ambit of British Broadband itself,” McDonnell told the BBC on Friday. If no agreement could be reached, the government would pay compensation subject to “commercial negotiation,” he said.
BT shares fell as much as 3.7% and TalkTalk Telecom Group Plc slipped 2.8% after it paused talks to sell its own fiber project, FibreNation Ltd., following Labour’s announcement.
But there were other factors in play, including a record payment by BT to retain Champions League soccer rights. BT shares recouped most of their loss later as analysts played down Labour’s chances of winning the majority it would need to carry out its plan.
There was also criticism of Labour’s plan to tax multinational companies based on the size of their U.K. activities. Technology companies often book their U.K. sales through countries such as Ireland or the Netherlands, making taxation based on sales difficult to enforce. Companies could take jobs to other countries to avoid the U.K. tax, analysts said.
Nicky Morgan, the Conservative cabinet minister with responsibility for digital services, dismissed Corbyn’s plan in a statement as a “fantasy” that “would cost hardworking taxpayers tens of billions” of pounds.
Still, Corbyn is unlikely to lose much sleep over the criticism at this stage of the campaign. Free broadband access and making big tech firms pay more tax have popular appeal, and trailing the Tories by double digits in many opinion polls, he needs some bold moves to cut through.
In 2017, his promises to re-nationalize rail, water and mail services proved popular with voters and contributed to then Prime Minister Theresa May losing her parliamentary majority. Corbyn will be hoping for even better this time.
©2019 Bloomberg L.P.