Sunday with Niall Paterson Interview with Jonathan Reynolds Shadow Treasury Minister

ANY QUOTES USED MUST BE ATTRIBUTED TO SUNDAY WITH NIALL PATERSON, SKY NEWS

NIALL PATERSON: Bring rail, water, electricity back into public ownership has proved to be one of Labour’s more popular policies whilst their position – or lack thereof sometimes – on Brexit causes occasional headaches so perhaps it’s no surprise that at the end of a week dominated by Brexit, Labour wants to talk about renationalisation. Joining me here in the studio is the Shadow Treasury Minister, Jonathan Reynolds. Mr Reynolds, a very good morning to you. I wonder if we can start where your Conservative colleague began, on the issue of Oxfam. We are hearing from the International Development Secretary, she believes that there may be the prospect of government funding being withheld from organisations like Oxfam if they don’t cooperate when it comes to safeguarding, I presume you’d agree with that?

JONATHAN REYNOLDS: This is an appalling story, I really am quite shocked to read what has come out over the last few days. Now when there was a very big furore over the President’s Club story, rightly so, the allegations of what had gone on there, this is clearly more serious and it deserves the same level of outrage. Now Oxfam do brilliant work around the world so it shouldn’t be used as an example of people being able to perhaps attack the principle of giving aid to developing countries because that’s a very important part of our policies in this country too but zero tolerance has got to be the only way to respond to these allegations and obviously there will have to be cooperation from Oxfam. It sounds to me like a lot of Oxfam staff actually did raise these concerns so clearly they share the view.

NP: But clearly something has gone badly wrong when people accused of mistreating vulnerable people are allowed to leave their jobs and even go onto other jobs within the same charitable sector?

JONATHAN REYNOLDS: Absolutely, this is outrageous, exploitative behaviour and the prospect of that continuing in other occupations and other job is frankly disgusting so clearly that has to be stopped and I think that a lot of people, whether my constituents or other people who work in the aid industry, would expect nothing less than that too.

NP: John McDonnell has once again this week made the claim that Labour’s programme of nationalisation, energy, water, Royal Mail, would be cost neutral, that it wouldn’t cost the taxpayer a penny, do you understand why some people are suspicious of that?

JONATHAN REYNOLDS: Well clearly there is a lot of interest in this area of policy. I think what people want is the best way for the British people to be pursued to run these organisations and to be frank, if we look at what we have at the minute, I can’t defend to my constituents Thames Water not paying any corporation tax for ten years, I can’t defend any English water company having a subsidiary in the Cayman Islands, that just doesn’t seem right to people and certainly no one can defend every penny of profit going out in dividends whilst debt is piled up so clearly things are not working at the minute. Now on the plan to bring them back into public ownership, it is a very well established principle that if you are bringing something back onto the UK balance sheets, you are acquiring an asset and you are swapping a shareholder entity for government to debt to do that, yes you are changing your balance sheet but the net cost to the country is neutral because you are obviously getting revenue from the assets you’re acquiring.

NP: But cost neutral doesn’t mean there are no upfront costs, so what are the upfront capital costs of taking these industries back into public ownership?

JONATHAN REYNOLDS: Well that would depend on the market value they have when Labour comes to power and the fact is that parliament would take into account …

NP: How much now, how much on this day?

JONATHAN REYNOLDS: Well it depends what factors parliament will wish to take into account because clearly the situation today is different to when they were taken into private ownership. There was no debt in the water industry, there was no debt transferred to private ownership when they were privatised, today that debt is £42 billion so clearly there is a range of factors that will have to be brought into account but where people have concerns, I say very clearly first of all this is not something that people should be worried about. Welsh Water is run as a cooperative, Scottish Water is not privatised, we have seen in the UK this work very well and clearly the way to undermine these industries and these sectors is when there isn’t public confidence in how things …

NP: I understand there is a logical underpinning to the argument for bringing them back into public ownership but what I and other people have been asking for some time now is a figure. Now if you are able to say this is a cost neutral measure, that in essence means you know what the incomings are and the outgoings are so how much would we have to spend to bring these industries into public ownership?

JONATHAN REYNOLDS: Well we are going to publish specific plans on that and we’re not going to do that at this stage but that will come out very imminently but I think the principles that we are pursuing here about swapping shareholder equity for government debt, this is a well-established accounting practice, it’s not something that should worry or unduly concern …

NP: John McDonnell is wrong though isn’t he when he says it will not cost the taxpayer a penny? Now all those pennies that we spend we may very well recoup but the idea that there isn’t an upfront cost, I mean that’s an attempt to pull the wool over the eyes of the electorate.

JONATHAN REYNOLDS: There is an upfront cost but what John has said is there is a revenue stream to cover the cost of that borrowing so that is why he is making …

NP: But how do you know if you don’t know what the state of the business is at the point at which you’ll buy it? The idea that you can say that this is cost neutral essentially means that you know that the profits from this business will cover the outgoings and the debt that you take through the government.

JONATHAN REYNOLDS: We know the returns that some of these companies have been able to return to their owners, we know the cost of government borrowing so we can be quite confident in that case and we will set that out in detail but I think when you look at the deal that my constituents and other people in this country are getting from those industries at the minute, there is a strong argument to change their structure. Bills are 10% lower in Scotland so we know this works. I know there is concern and where you will come back at me is to say but what about the principle of investor confidence? Now I absolutely understand there are pension funds and so forth who have invested in those companies and what we are saying very clearly to those people is we intend, we have said very clearly, to raise public investment in the UK so we are not going to do anything which undermines investor confidence and ultimately what we’re going to offer those pension funds is long term stable returns through the kind of policies Labour will pursue so there is …

NP: So taking on the water industry in England and in Wales, taking that back into public ownership, several of those companies are not listed on the stock market, you keep saying that parliament will decide upon the value of these things which many people take to mean that you will pay less than the market value of the organisation, how is that not going to undermine investor confidence?

JONATHAN REYNOLDS: Because the precedent of this happening with things like Northern Rock and so forth has operated in the same way. There’ll be a range of factors which need to be taken into account in terms of the public interest, in terms of what has already gone out from the public in terms of the level of debt and how for instance, if any of those companies hasn’t paid their taxes in the proper way because of the way they have structured themselves, quite imaginatively in some cases, those are all reasonable factors to take into account and I would imagine parliament would seek to do that.

NP: But do you understand why many viewers watching this – and again we have asked John McDonnell about this, we have asked a number of your colleagues in the Shadow Cabinet to put a figure, put a figure on the upfront cost of this nationalisation programme. It does rather look like you are avoiding essentially admitting to a rather eye-watering figure, some estimates as high as 300 billion and that in addition to the hundreds of billions that you’ve set aside for the Transformation Fund, that’s in addition to the hundreds of billions that you are setting aside for the Investment Bank – there’s an awful lot of money being borrowed by the Labour government if that indeed happens.

JONATHAN REYNOLDS: Well I’ll just say on that, I’ve seen the figures from the water industry themselves and from the Conservative party that they’re using an and on some of those things they have included things like the cost of bring some PFI deals back onto the UK balance sheet. Now what I say on that is, that debt already exists, we’re not creating that debt by bringing that back in-house. Yes, it’s an accounting change because it’s going to be on the UK balance sheet but already up and down the country there are PFIs being renegotiated and frankly a better deal is being pursued for the taxpayer so if we do that and there’s a cheaper way, a better deal basically for the taxpayer by bringing those PFIs in-house, that is not creating debt. Yes, it’s an accounting change but it is a far better deal for the country.

NP: Can I give another example, the water industry, estimates vary again but between £87 and 90 billion, that’s the equivalent of the wage bill for the NHS for a year, that’s the equivalent of the Department for Education’s budget, these are no small figures that we’re talking about and this lack of clarity from Labour when we are asking very straightforward questions, it does rather look like you are trying to avoid putting a figure on it because any figure that you give will be huge and pretty embarrassing.

JONATHAN REYNOLDS: It’s not embarrassing, it’s a sophisticated policy that we acknowledge there’s a lot of things that have to be taken into consideration and as I said to you, we will publish those figures and we will be quite clear about the factors that have to be taken into account but ultimately, if we know for instance that on the average £400 UK water bill we could potentially bring that down substantially by structuring this industry in a different way, by not having these very large returns go out of the industry to investors, I think people will look at that figure – potentially saving £100 on their water bill – and …

NP: Water bills are already going to go down over the next decade as a result of the current system, I just wondered – and we are beginning to run out of time and I just want to focus on Brexit for a second. Do you think that a transition period is an inevitability?

JONATHAN REYNOLDS: I think it’s essential, the government are …

NP: Is it an inevitability?

JONATHAN REYNOLDS: Well I think for Europe and for us it is essential. Nothing is inevitable in these discussions, clearly I think the way the government has handled much of this frankly nothing seems inevitable, that’s seems the only thing we can say for Brexit so far, but it is essential. I mean without a transition deal the damage to UK industry and to the EU as well, will be so palpable I frankly can’t see anything else occurring other than a transition period.

NP: So what in your mind then is the risk of us not having a transitional arrangement with the European Union?

JONATHAN REYNOLDS: Well I think the risk is the government keeps specifying what they want to see happen and then not actually giving any sort of detail or in some cases ruling things out, like any sort of customs arrangement, that would then give them the outcome they have already claimed they want to see in for instance Northern Ireland so at the minute – and of course as well as that, Cabinet themselves clearly don’t agree with each other as to what the eventual outcome will be. Now if we can’t make our minds up and ask for what we want, how can the EU respond to that?

NP: So does that involve membership of the single market, membership of the customs union? That has all now been ruled out by the government but not of course by the Labour party.

JONATHAN REYNOLDS: Well I think for the transition period the terms will broadly be as EU membership. I think in terms of how to negotiate that, the time isn’t there to negotiate anything very different from that. Now the long term position, I think our position is absolutely right. Why should we rule out things that are clearly in our economic interests, clearly the things that we’re saying will have to be agreed to by the EU so that’s why we say it’s the starting point of negotiations for things like the customs union. We couldn’t for instance have a customs union as Turkey has because that wouldn’t give us enough control over our own economy but we clearly should start off with what is in our economic interests and ask the EU to agree to that. The difference with the government is they haven’t decided yet what they want to see happen and if they can’t decide, they can’t ask for it from the European Commission.

NP: Jonathan Reynolds, we look forward to getting the details from you on the nationalisation programme but for now though, many thanks for joining us.