Would Labour really save families more than £6,700 a year? | Politics

Claim

John McDonnell claims a Labour government would save families more than £6,700 a year.

Background

In a speech in Birmingham on Wednesday, the shadow chancellor will claim most households have been hit by the rising cost of living under the Tories.

He will say households would save about £6,700 a year on their utility bills, rail fares and childcare under a Labour government.

It breaks down into savings of £559 on energy bills, £113 on water, £364 on broadband, £2,194 on a pair of rail season tickets, £2,941 per child on average for childcare, £108 on yearly prescription charges and £437 on free school meals.

At the heart of the plan is Labour’s renationalisation of mail, water, energy and rail, as well as the free public provision of broadband.

Reality

Much of the savings rely on nationalisation, though the exact price of taking utilities into public ownership has yet to be determined and the path to acquiring them might not be smooth.

Labour says that parliament would decide, though questions remain. The Institute for Fiscal Studies warns that overpaying would be bad value for taxpayers’ money, yet underpaying could damage international investment in Britain.

Some of the Labour analysis stems from a Greenwich University report published last month, which recommended that a Labour government pay about £30bn less than the combined market value of the water companies, energy firms and Royal Mail.

Such a move could result in legal challenges from private investors. Business lobby groups and the Tories argue paying below market value would dent the value of pension funds, costing households money. Many investors are, however, based outside Britain, while pension and financial asset wealth is not evenly distributed. Efforts to assess the price Labour might pay have also been over-inflated.

Public utilities are common across Europe, while scrapping dividends for private investors could enable cuts to bills. According to Greenwich University, almost £6bn is paid in dividends each year that could be passed on in savings to consumers. Much, though, would depend on how efficiently the state can run them.

Some of the savings depend on Labour hitting targets by 2030, rather than being available to households immediately.

Labour says around £400 a year could be saved by upgrading the 27m homes in the UK to the highest energy-efficiency standards, a target it has set for 2030. However, experts warn such a plan would be extremely challenging.

Around £364 relies on Labour bringing full-fibre broadband to every home in the country, another potentially difficult project with a target date of 2030.

Verdict

Nationalisation could save households money that would otherwise go to private investors, but is reliant on the smooth execution of Labour’s plan. The party could face difficulties and unintended consequences, putting savings at risk. Some of the savings are also not open to families until 2030.