Industry chiefs would see pay cut and have to reapply for jobs under plan outlined at conference

The leaders of Britain’s water industry would have to reapply for their jobs at drastically reduced salaries under Labour’s plans for renationalisation, outlined by John McDonnell at the party’s conference.

Fleshing out its plans for renationalisation, Labour said there was no guarantee that the current senior executives and directors would continue in their posts, and that the new management would have their salaries capped at 20 times that of the lowest-paid workers.

Details of the proposals were revealed after the shadow chancellor used his keynote address to call the privatisation of water a “scandal” and say he wanted the industry to be in the hands of local councils, workers and customers.

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Almost a quarter of a century after Tony Blair used his first speech as Labour leader to ditch Labour’s commitment to nationalisation, McDonnell said the principles of clause IV – Labour’s commitment to public ownership drawn up in 1918 – were “as relevant as they were back then. Fair democratic, collective solutions to the challenges of the modern economy.”

“I believe it’s time,” the shadow chancellor said. “It’s time to shift the balance of power in our country. It’s time to give people back control over their lives.

“At the heart of our programme is the greatest extension of economic democratic rights that this country has seen.”

Labour also provided details of its plans for inclusive ownership funds (IOF), which will be mandatory for all companies employing more than 250 people and will affect a minimum of 10.7 million people. Every year companies would transfer at least 1% of their ownership into the fund, up to a maximum of 10% total IOF shareholding.

McDonnell said that far from being horrified by the prospect of Labour renationalising water, energy, the Royal Mail and the railways, opinion polls showed that voters supported the idea.

“It’s not surprising. Look at the scandal of water. Water bills have risen 40% in real terms since privatisation; £18bn has been paid out in dividends. Water companies receive more in tax credits than they pay in tax. Each day enough water to meet the needs of 20 million people is lost due to leakages. With figures like that, we can’t afford not to take them back.”

McDonnell said that Labour would press ahead with its socialist transformation of Britain even if it came to power in a crisis.

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“The greater the mess we inherit, the more radical we have to be; the greater the need for change, the greater the opportunity we have to create that change, and we will.”

McDonnell said Labour was ready for an election whenever it was called and ready to rebuild Britain after “eight hard years of austerity and economic failure”.

Concluding an address that included plans for stronger trade union rights, giving workers a bigger say in the running of their companies and a crackdown on tax avoiders, the shadow chancellor added: “We’ll be proud to call that future socialism.”

McDonnell said that Labour wanted to move away from the top-down, bureaucratic model of state ownership that existed in the decades after the second world war. Labour was launching a consultation on how to make the public services democratic and setting out plans that would put the water industry back in the hands of councils, workers and customers.

“But, be clear, nationalisation will not be a return to the past. We don’t want to swap one remote manager for another,” he said.

McDonnell said Labour would set up a “public and community” unit in the Treasury to see its public ownership programme through. “It will bring in the expertise we will need,” he said.

“Let me make it absolutely clear that the full weight of the Treasury will be used to take on any vested interests that try to thwart the will of the people.”

Carolyn Fairbairn, the director general of the CBI, said Labour’s plans would result in lower living standards.

“From renationalisation to dilution of shares, Labour seems determined to impose rules that display a wilful misunderstanding of business. Their policies would immediately reduce the value of shares owned by ordinary people by over 10% and hobble UK ambitions to compete on a global stage. That’s a double whammy for people’s pensions and savings.”