I will preface this article by declaring my own biases upfront. I’m a proud member of the LibDems. I also indirectly own shares in Royal Mail and several rail, energy and water companies via ETF investments which hold them and do some work in connection with the UK Energy and Water industries.

Given my biases above, it should come as little surprise that I strongly oppose Labour’s manifesto plans to nationalise the various industries listed above. However, I still feel it’s useful to have a fair look at how much much nationalising each of them would cost along with trying to put those costs in perspective.

Royal Mail

Royal Mail was only privatised in late 2013, making it by far the most recent example here. And given that the government lost £1.1 billion when it did so, I can see why Labour might argue for its re-nationalisation.

This one is also the easiest to quantify since its just one company and it’s publicly listed. Royal Mail’s current share price of just over 440p per share gives it a market cap of just over £4.4 billion.

While that may sound like a lot, in terms of government revenues and expenditure, its not a huge amount. In 2016, the government raised only slightly more (£4.8 billion) from Inheritance tax and spent slightly less (£4.1 billion) on education in Wales.

If the government financed the purchase entirely using borrowed money it would increase the 2017 deficit (assuming everything else stayed equal) from £52 billion to £56.4 billion or around 8.5%.

This would increase total UK debt from £1,730 billion to £1,734.4 billion, or less than 1%.

Rail Industry

Given the UK rail industry's image, it’s no wonder Labour wants to re-nationalise it.

The industry was first nationalised in 1948 and then re-privatised in 1993. So the majority of people in the UK have had experiences with both systems. The government already owns Network Rail which in turn owns most of the track in the UK.

However, Britain's rail lines themselves are run by train operating companies as franchises for fixed periods of time (usually 10 years). There are currently 18 franchises in Britain (Rail in Northern Ireland was never privatised).

Therefore, in theory the government could just nationalise each franchise as they come up for renewal. However, the Caledonian Sleeper franchise is not set to renew until 2030, which means it would take more than two decades to complete this process.

Moreover, the train operating companies often lease their rolling stock (trains), from other companies. Thus, the government would either have to continue to do so or purchase its own rolling stock.

However, in theory nationalisation could be done at nearly no additional cost, but would take 4 government terms to complete.

Water Industry

The water industry in England and Wales was privatised in 1989–90. However, many of the companies are not publicly listed or if they listed are part of international conglomerates.

However, estimates for the cost of nationalising the water industry in England and Wales run between £67 billion and £107 billion, more than an order of magnitude more than the cost of nationalising Royal Mail.

To put that in some perspective abolishing all university fees (estimated at £11 billion per year) would only cost £55 billion over one full 5-year government term. Or this amount would be 50% more than the UK’s annual Defence budget of £45 billion. Or in terms of revenue the cost could easily be more than what is raised from Corporation tax (£43 billion) and Council tax (£30 billion) combined.

Or if we it were paid for using borrowed money, it would increase the deficit by 120% to at least £119 billion, which would make it the largest ever recorded. Although it would only increase the UK’s total debt by 4% to just under £1.8 trillion!

Energy Industry

The electricity industry in England was privatised in 1989–90 at the same time as the water industry.

And if estimating the cost of nationalisation the Water Industry is tough, then trying to figure out the accurate cost of nationalising the UK Energy Industry is even trickier. Just to start there are over 50 energy suppliers in the UK from the Big Six to tiny local players.

However, the Guardian estimates that buying National Grid would cost £38 billion, plus an additional £60 billion to buy the six power and four gas networks. So even at the lowest possible cost this still comes out to around £100 billion.

To put that in some perspective, that’s more than the UK spends on all Education (£86.2 billion) and is getting close to how much the UK raises via VAT (£120 billion).

If it were to borrow the money, it would explode the deficit to £150 billion, 188% higher than it’s projected to be in 2017. But in terms of total debt it would increase it by less than 6%.

This is likely why Labour is not proposing outright nationalisation of the energy industry, but instead:

Regain control of energy supply networks through the alteration of operator license conditions, and transition to a publicly owned, decentralised energy system.

Conclusion

Therefore, re-nationalising the UK rail industry and Royal Mail could in theory be done relatively cheaply (at least from a government point of view). However, nationalising both the Water and Energy industries would be far more expensive, costing at least £165 billion!

This could realistically only be done by borrowing more money since Labour’s income tax rise on those earning £80k+ per year is expected to raise no more than £7 billion per year and increase in corporation tax to 26pc up to a further £19 billion per year.

Whether or not you think this is worth the cost is an open question, but be aware that nationalising whole industries does come with hefty price tag.