The Prime Minister’s proposal to expand state control over key industries could significantly increase government debt, according to analysis from the Institute of Fiscal Studies (IFS). Andy Burnham, leader of the Labour Party in Manchester and a prominent advocate of what he terms "Manchesterism," has emphasized a shift toward greater public ownership in sectors including housing, water, energy, and transport.

Ahead of the Labour Party’s annual conference, Burnham reaffirmed his commitment to reversing what he described as failed privatisations, particularly stressing reform of the railway system. Speaking to BBC South, he highlighted his intent to change how the railways operate under his policy agenda.

The IFS briefing noted that Burnham’s proposals encompass a broad spectrum of approaches to increasing public control, ranging from direct nationalisation to stronger regulatory measures. The think-tank pointed to potential fiscal risks associated with these plans. Specifically, the government could face challenges in balancing compensation payments when reclaiming ownership of previously privatised companies. Paying too little in compensation could deter future investment, while overpaying might reduce incentives for companies to adhere to regulations or manage finances prudently.

Furthermore, the IFS underscored the complexity in determining when such companies would be classified within the public sector for accounting purposes. The Office for National Statistics (ONS) assesses whether organisations fall under government control, which influences their inclusion in the public sector balance sheet. This classification carries implications for government finances, as entities deemed public sector would have their ongoing profits or losses reflected in fiscal calculations.

The report cautioned that there is no clear boundary between policies involving formal government ownership and those relying on regulatory oversight, complicating the fiscal outlook of increased public control. Any move leading to reclassification of organisations into the public sector would have direct effects on the government’s adherence to fiscal rules and debt targets.

As the Labour Party prepares to discuss these proposals, the analysis highlights the potential for substantial fiscal consequences stemming from the expansion of state influence over key industries, underscoring the need for careful consideration of compensation levels and the balance between ownership and regulation.