For Corbyn the proposal would create a ‘treasured institution’, but Johnson calls it ‘crazed’

This article is more than 10 months old

This article is more than 10 months old

The prime minister attacked Labour’s ambitious plan to nationalise part of BT and provide free broadband across the UK as a “crazed communist scheme” on Friday, amid a furious backlash from business.

Labour believes the plan, part-funded by a tax on internet giants such as Facebook and Google, is a vote winner, combining a consumer-friendly pledge to cut bills with a commitment to taking on powerful corporations.

But the Conservatives have seized on it as a signal of Labour’s intent to renationalise swathes of the economy. Speaking at a campaign event in Oldham, where he was launching his red, white and blue battlebus, Boris Johnson called the policy a “crazed communist scheme”.

Outlining the proposal in Lancaster, however, Corbyn said it would guarantee what was now a basic utility, encourage social cohesion, bolster the economy and help the environment.

He said the service would become “our treasured public institution for the 21st century”.

How feasible is Labour's free broadband plan and part-nationalisation of BT? Read more

“What was once a luxury is now an essential utility,” the Labour leader told an audience at Lancaster University. “I think it’s too important to be left to the corporations. Only the government has the planning ability, economies of scale and ambition to take this on.”

The plan would involve nationalising elements of BT connected to broadband provision, forming a new company called British Broadband. Labour says it would cost about £20bn to roll out universal full-fibre broadband by 2030.

Corbyn portrayed the idea as a central element of “the most radical and exciting plan for real change the British public has ever seen” in the Labour manifesto, being launched next week, saying: “It’s going to knock your socks off – you’re going to love it.”

He added: “I don’t want anyone to be able to say, a few years into a Labour government, that nothing ever changes or that politicians are all the same.”

The chancellor, Sajid Javid, attacked the plan as an “attempt to confiscate billions of pounds’ worth of people’s savings”. He said: “This is primary school politics not grown-up government. Labour are on track to beat their last manifesto record of using the word ‘free’ 39 times. People can see through these fantasies.”

Facebook Twitter Pinterest Boris Johnson steps from his battlebus. Photograph: Frank Augstein/Pool/AFP via Getty Images

The shadow business secretary, Rebecca Long-Bailey, told the Labour event that all affected staff would be transferred to the new organisation on the same pay and conditions, while other companies that bundle broadband into packages including services such as pay TV and mobile phones could continue selling such add-ons.

“We wouldn’t want to interfere in that market in any way,” she said. “Certainly, providers who are already providing those enhanced services, we’d welcome that continuation.”

However, BT shares dropped after the announcement on Thursday night. On Friday, TalkTalk said it had postponed the sale of its full-fibre broadband business, FibreNation, as it considered the implications of Labour’s proposals. BT suggested the scheme would cost closer to £100bn.

In his speech, Corbyn said universal rapid broadband “must be a public service, bringing communities together with equal access in an inclusive and connected society”.

He said: “Fast and free broadband for all will fire up our economy, deliver a massive boost to productivity and bring half a million people back into the workforce. It will help our environment and tackle the climate emergency by reducing the need to commute.”

Long-Bailey said the scheme could add 1% a year to GDP, and save 300m commuter trips a year.

The shadow chancellor, John McDonnell, presented the idea as being about basic social fairness: “It’s about large numbers of children being able to do their homework properly, and have the speed of connectivity.”

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He also said parallel Labour proposals to bring the railways and water utilities into public ownership would allow better coordination for the work of laying the cables.

The initiative would be funded from a green transformation fund, with McDonnell saying funding would come in part from a tax on the giant internet companies, based on the proportion of global revenues they earn in the UK.

Openreach, the broadband network that is a distinct company within the BT group, is worth about £12bn to £15bn but the party said parliament would decide the rate of compensation. Labour has said it would issue government bonds to shareholders for all nationalisations.

BT’s chief executive, Philip Jansen, told the BBC Labour’s plans were “very, very ambitious ideas” and challenged the party’s figures.

“It needs funding, it is very big numbers, so we are talking £30bn-£40bn … and if you are giving it away over an eight-year timeframe it is a another £30bn or £40bn. You are not short of £100bn,” he said.

TalkTalk’s half-year results were delayed on Tuesday as it was close to completing a deal for FibreNation, but the sale was paused on Friday after Labour’s announcement.

“Not surprisingly, when news of that sort lands, everybody’s reviewing, pausing for breath, and considering what that means, and that’s what happened here,” said TalkTalk’s chief executive, Tristia Harrison.

“We are in extremely advanced discussions and negotiations,” she added. “We’re just pausing and reconsidering.”

Business groups said they agreed with the aim of improving Britain’s broadband provision, but balked at renationalisation, saying it would slow the rollout of faster fibre connections by the private sector.

The Confederation of British Industry, the lobby group representing big businesses which has repeatedly clashed with Labour over nationalisation, criticised “blinkered ideologies” and said the party’s plans to bring large parts of the UK economy into public ownership would deter foreign investors.

Virgin Media, one of the main competitors to Openreach, said it had invested billions of pounds in the UK and that private investment was key to improving broadband networks.

BT’s share price fell by 1.1% on Friday to 193p, with some market watchers saying the modest decline reflected investor belief that the policy was unlikely to be implemented. Analysts at Jefferies, a US investment bank, said Labour’s costing of the policy would have to take into account “less efficient operation” of Openreach in government hands, as well as possible compensation for other network operators and retail broadband providers whose services could be undermined.