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14 February 2018updated 28 Jun 2021 4:39am

Leader: Why Labour’s renationalisation is a better choice than the private sector

Water and sewerage bills are £2.3bn a year higher than if the utilities had remained in public ownership.

By New Statesman

For too long, nationalisation was a taboo subject in British politics. New Labour accepted all of Margaret Thatcher’s privatisations and even extended the market into realms where the Conservatives feared to tread (such as air traffic control and Royal Mail). Few expected the idea of public ownership to return in any significant form.

However, it is central to Labour’s inchoate programme for government under Jeremy Corbyn. As the shadow chancellor, John McDonnell, has confirmed, the party would renationalise the railways, the water companies, the energy grid and Royal Mail, while also ending the Private Finance Initiative (PFI) scheme, which was dramatically expanded during the Blair-Brown years.

The Conservatives deride nationalisation as retrogressive and redolent of the 1970s era of stagflation and industrial unrest. But polls have consistently shown that an overwhelming majority of the public favours state-owned utilities. What is driving this desire for change?

Voters are certainly weary of substandard service and the excessive prices imposed by many private companies. A 2017 study by the University of Greenwich, for instance, estimated that consumers in England were paying £2.3bn a year more for their water and sewerage bills than if the utility companies (many of them owned by private equity funds or overseas investors) had remained in public ownership. Of the £18.8bn profit made by nine firms in the decade to 2016, £18.1bn was paid out in dividends, with infrastructure investment funded by more expensive commercial borrowing.

A recent assessment of the PFI scheme by the National Audit Office found that overall spending on the deals was higher than publicly financed alternatives: a group of schools cost 40 per cent more to build – and a hospital 70 per cent more – than if funded by government investment.

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Even as they dismiss public ownership, the Conservatives have been forced to consider its partial return on the railways. Three years after the reprivatisation of the East Coast Main Line, the inept Transport Secretary, Chris Grayling, has conceded that Virgin Trains East Coast’s breach of its £3.3bn contract may lead to renationalisation. Opponents of public ownership contend that it would be “unaffordable”. Mr McDonnell, however, has suggested Labour would acquire assets by swapping shares for government bonds (with the state gaining new revenue streams). In the case of rail, a Labour government would progressively renationalise the service as franchises expire, which would be a protracted process.

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Public ownership is not an invariable panacea. The state, as well as the market, can become a vested interest. Few are nostalgic for the era of British Rail. Yet a dogmatic preference for the private sector has not served the public interest. Across Europe, most notably in Germany and France, the state plays an indispensable role in ownership and strategy. In Britain, where Conservative grandees once denounced Mrs Thatcher’s privatisations as “selling off the family silver”, Leviathan should be roused from the depths. 

Gordon’s gravy train

Gordon Taylor is the chief executive of the Professional Footballers’ Association (PFA) and arguably the world’s most successful trade union leader. A former journeyman footballer, he has occupied his position since 1981 and now, at the age of 73, is earning close to £2.3m a year. Nice work if you can get it.

Mr Taylor has been accused of riding the PFA gravy train for far too long and enriching himself while his association spent just £100,000, as it did in 2016-17, on concussion and head injury research. Football – especially the English Premier League – has become the ultimate expression of rampant, winner-takes-all free market globalisation. Mr Taylor, like so many others in the game, is cashing in.

Is his salary justified? “Only in football, which is so detached from reality, could you pay yourself a salary of that nature,” said Simon Jordan, the former Crystal Palace chairman. Yet Mr Taylor – who has had personal problems with gambling – retains the support of his members, the players. And why not? Footballers’ salaries have risen extravagantly on his watch at the PFA. He is that rare thing: a successful union baron at the head of a rampant neoliberal industry. 

This article appears in the 15 Feb 2018 issue of the New Statesman, The polite extremist