Shadow chancellor John McDonnell has vowed to crackdown on the City investing in “property speculation”.
“The City is not channelling investment into high-value, high-productivity businesses,” he said in a speech at the Labour Party conference in Brighton.
“Instead, it is channelling investment into property speculation. It’s the rentier economy, where wealth is secured not by what you produce, but by the amount of rent you can charge. So we will change that.”
State direction of innovation and investment would instead promote “vital areas of expertise” in robotics, electronic cars, cleantech and the smart city, McDonnell said.
If elected, Labour would a establish a “strategic investment board”, comprising the chancellor, secretary of state for business and governor of the Bank of England to co-ordinate the promotion of investment, employment and real wages.
“We will put taxpayers’ money into key research projects; we will foster the creation of networks and clusters of expertise,” McDonnell said.
“To reconnect the financial sector to the economy of research and development and production, we will transform our financial system.”
A Labour government would also rebalance disparity of investment in London and the Home Counties versus the rest of the country, he promised.
“This Tory government plans to invest in the North just one-fifth of what it will spend on transport per head in London,” McDonnell said.
“We will legislate for a fair distribution of investment. We will devolve decision making through the regional development banks, our mayors, and regenerate the powers and resources available to local councils.”
The shadow chancellor also pledged infrastructure investment including “Crossrail for the North”, an extension of HS2 in Scotland, funding for Midlands Connect and electrification of railway lines from Cornwall to London.
McDonnell’s swipe at the property sector follows criticism by Liberal Democrat leader Vince Cable last week when he told his party conference in Bournemouth that Britain “must end the stranglehold of oligarchs and speculators in our housing market”.
“I want to see fierce tax penalties on the acquisition of property for investment purposes, by overseas residents,” he said.
Commenting on the Labour Party conference today, Linklaters’ global head of real estate Andy Bruce said the sector’s greatest challenge is justifying the role it plays in society.
“It does not take a giant leap of imagination to see the real estate industry becoming a pariah, in much the same broad-brush way that investment bankers were labelled post-GFC,” he said. “That is a far more serious challenge…since it would go to the heart of how the real estate industry is valued and heavier regulation and oversight of our industry would be sure to follow.”
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