Forget the magic money tree, this is a forest.

Do you have a pension?  Well, chances are your pension scheme invests in a lot of household names.  That’s how they grow the money you regularly put into your pension pot.  They look for good businesses and invest.  Then as the business grows they get pay back.  This is your pension.   

So yesterday at the Labour party conference must have had you scratching your head and wondering what would to happen to your pension should John McDonnell become Chancellor of the Exchequer if Labour wins the next general election.  If it didn’t it should have.   

Announcing his plan to in effect nationalise PFI contracts John McDonnell noted that they started under John Major.  True.  But if you want to introduce history to your argument, you have to be consistent.  So he really should have mentioned that the vast majority began under Labour governments. The figures?  604 PFI projects started under Labour.   112 under the Conservatives.  Don't get me wrong.  PFI was perhaps not the best way to find investment.  But it is what successive Labour and Conservative Governments did.  And in many cases the contracts are still in place. 

Mr McDonnell then went on in the same vein in relation to the Utility companies. And this is where you pension becomes very important. So listen up.    

Mr McDonnell does not believe investors in utility companies, your pension fund, would be fully compensated at market value for their shares under Labour’s nationalisation plans.   Instead, as he admitted on Radio 4, share prices would be determined by Parliament according to how MPs perceived the past behaviour of firms:   “The value of any industry which is brought into public ownership is determined by Parliament itself… the perceived behaviour [of companies] affects the price…”   

When asked if shareholders would be compensated at market value, McDonnell replied:   “The market value will be determined by Parliament.”  So in one short sentence he displays total ignorance of how trade works.  The market value of anything is determined in the market place.  Of businesses competing for our spending power. That is why it is called the market value.

So, if Labour doesn’t pay the true market rate but a rate that it as a political party decides it should pay, your pension is well and truly in trouble. 

Not that I’m against a democratically elected government doing such a thing.  He can bring these back on to the public debt book.  They would have a mandate.     

But Mr McDonnell needs to be crystal clear that his policy will destroy the value in your pension fund.  Labour’s economic illiteracy in a nutshell…  And as one commentator put it, “Forget the magic money tree, this is a forest”…