Labour and the CBI should get their spending debate back on the rails

In the middle of the political storm over Brexit, last week’s row between Labour and the Confederation of British Industry came as a distraction. While the big issue of the country’s future trading relations with its biggest economic partner should have taken priority, the two sides were instead at loggerheads over nationalisation.

The CBI was caught red-handed with a cheap political stunt when it claimed that Labour’s nationalisation plans would cost an “eye-watering” £196bn. In a piece of analysis unbecoming of the nation’s leading lobby group, it trumped up the figure by including spending plans that are not official Labour policy.

The CBI included purchasing existing railway rolling stock, to the tune of £14bn, even though it later admitted it knew this was wrong, in an email exchange with Labour that was later seen by the Guardian.

So far Carolyn Fairbairn, the CBI’s director general, has refused to apologise to the party and says she stands by the £196bn figure. To regain trust, she should concede a mistake has been made. Future interventions could be undermined by a lingering suspicion of the lobby group’s methods.

CBI admits error in £196bn price tag for Labour plans

While the storm that raged between Britain’s leading business lobby group and Her Majesty’s official opposition was reminiscent of an unedifying he-said, she-said playground tiff, important questions were nonetheless raised.

That the CBI felt the need to trump up its analysis in the first place shows just how scared major companies are of Jeremy Corbyn’s party. It also reveals that the lobby group is out of touch with public opinion, as support has grown for renationalising the railway network and utilities companies.

A decade on from the financial crisis, with average wages no higher than they were before the crash, people have had enough of big companies charging a king’s ransom for their products and services, while doling out huge sums of money to their senior executives and shareholders.

Despite this, Labour’s reputation in the City and in boardrooms up and down the country is not ideal for a government in waiting. Many company bosses worry that Labour would damage the British economy as much, if not more so, than Brexit. Corbyn is regularly asked at business conferences if he dislikes people getting wealthy from running a company. It is a concern the party must address to win over swing voters who will be vital in the forthcoming election.

Labour also still suffers from a degree of mistrust about its ability to safely manage the public finances. The accusation that Labour was reckless in the run-up to the financial crisis might well be misguided – paying nurses well and building schools was not the reason for the banking crash – but the Tory propaganda since 2008 still sticks in the minds of many.

The tide is turning against austerity. The Conservatives have become profligate and are recklessly throwing money about to win votes in an upcoming election. But in a straight fight about who can be trusted to raise spending the most, Labour still needs to make greater efforts to convince the public.

Talking more openly about its plans for renationalisation would help to allay public concern. If the policy is as popular as the party believes, then it should have little to fear. If the CBI got its numbers so badly wrong, what is the accurate cost and benefit as Labour sees it? The party should spell this out in detail as a matter of priority.

There are legitimate questions about Labour’s spending plans. About the impact nationalising large swaths of the economy might have on business investment, or about the costs and benefits. But the row last week was not a constructive one. The quality of debate badly needs improving on both sides.

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