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20 January 2020

What Labour gets right and wrong about nationalisation

Which parts of the agenda the party keeps or loses should be about more than which elements are currently popular.

By Stephen Bush

One Labour policy that I liked at the last election was the party’s pledge to provide free-at-the-point-of-use broadband (though I was sceptical about its preferred route to deliver this).

Now the policy has achieved a dubious accolade: it is the first to be explicitly name-checked as heading for the trash heap by two of the candidates for the party’s leadership: Lisa Nandy has said that she would drop the commitment from Labour’s next manifesto, while Jess Phillips has said that she will nationalise the railways – implying that many of the party’s other nationalisation commitments are headed for the scrapyard.

There is a lot to go into here: there are the contours of the policy itself and the political impact of the policy announcement.

Let’s deal with the politics first, because it’s simpler: while I liked the broadband policy, it was very clear to me, as I travelled the country covering the election, that it became a symbol, more than any other policy, of the general implausibility of Labour’s platform. I think this is perhaps because, unlike almost every other policy announcement by any party, the BBC opted to announce it via a push notification from its smartphone application, the most popular news app in the United Kingdom. From there it travelled out via Facebook and in conversation.

So if you were looking for a policy to ditch to show voters who doubted Labour could keep its promises that you have “got the message”, repeatedly saying that as Labour leader you wouldn’t be providing free broadband is certainly one way to do that.

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What about the policy itself? My doubts about the policy at the time hinged on Labour’s proposed method to provide free-at-the-point-of-use broadband: to nationalise BT Openreach at a cost of £20bn. While it is an open-and-shut case that it was a 30-year-long mistake on the part of Margaret Thatcher’s government to actively prevent BT from investing in fibre-optic cable, it’s not clear that the way to remedy this mistake necessarily runs through doing what Thatcher should have done in 1990.

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In that way, it’s the mirror-image of something Thatcher got right that subsequent governments failed to do: she kickstarted the construction of three new nuclear power plants in a decade. Had John Major and Tony Blair kept that up, our emissions would today be much, much lower. However, it’s not certain that the best way to deliver clean energy in 2020 is more nuclear power, because it is really expensive and there may now be perfectly adequate and cheaper renewable energies available.

The difference between both hobbling BT’s ability to invest in the technology of the future and selling it off and say, privatising the United Kingdom’s railways (of which, more below) is that what we need from the railways hasn’t materially changed since 1990, or 1900 for that matter. Whether the railways are in private or state hands, the policy ask will not change: people and goods need to be transported from A to B as quickly and efficiently as possible.

Whereas it may well be that we are entering an age when what is needed is not free-at-the-point-of-use broadband delivered by a fibre-optic underground network and built at considerable expense but free-at-the-point-of-use cellular data delivered in a completely different way. Nationalising Openreach may well mean taking on the liability for a soon-to-be-obsolete network far too late to secure the benefits that the United Kingdom could have harnessed in 1990.

But the argument for free-at-the-point-of-use data is, I think, fairly strong. Almost everyone in politics accepts that there are some things that are better paid for collectively because of our shared benefit, some things that should be paid for by the people who use it alone, and others that should be paid for by a combination of the two. There’s no particular reason why access to the Internet should be paid for by its users alone but the use of, say, the motorways should be paid for in part by everyone. (Vehicle excise duty pays for maintenance but the hidden subsidies towards private car ownership, and the cost of policing the roads, are paid for out of general taxation.)

That question will evolve and change constantly over time and the Internet may well now be a service that ought to be provided free to its users – while motorways should, perhaps, be exclusively paid for by their users. I’m not saying the argument for either is open and shut: I’m just saying that both questions deserve a more thorough debate than the assumption that because we already collectively subsidise motorways that is fine and good, but because we don’t currently provide free Internet it would be bad or particularly radical to do so.

But it is clear that if you want to provide free Internet, you are going to have to make a case for it among the general public, who at present are not sold on it, or at least were not in the form that it appeared in Labour’s 2019 manifesto. That’s another important difference between it and nationalising the railways: bringing the railways back into public ownership is, and always has been, a popular policy. There is no political need to make an argument for doing it. That’s one reason why that policy area is one that both Nandy and Phillips are comfortable committing to. Indeed, Nandy explicitly anchored her doubts about Labour’s broadband policy in the concerns expressed by voters in her constituency about it.

Renationalising the railways is popular for the same reason that paying for the motorways out of general taxation is: because we used to have publicly owned railways and therefore bringing them back is “common sense”, whereas having pay-to-use motorways or free-at-the-point-of-use broadband is strange and radical.

But it is far from clear that renationalising the railways is common sense, not least because it is a misnomer to speak of the United Kingdom having “privatised railways”. The British government already owns, runs, maintains and expands the size of the United Kingdom’s railway network, although it does the latter with far less ambition than it ought to. Some of the trains that run on top of the state-owned railways are provided by private companies. But the UK’s railways are no more privatised than “the motorways” are, just because private companies provide coach services on them.

The real problem with the privatised parts of the railway network is that the partial privatisation of the railways has allowed successive government ministers to raise their arms in the sky and say “It’s just [Insert Company Here], what can I do?” when the problems with the service are the result of things that the government controls.

In fact, there is little difference between what the Department for Transport actually owns and runs nationwide and what Transport for London – the publicly owned provider of most transport within the capital, which is internationally admired and emulated – actually owns and runs in the capital. It is just that TfL is well-run, blessed with strong institutional memory and, crucially, the blame for any poor services is correctly located – by both the voters and the press – at the feet of the Mayor of London. Imagine what would happen if Sadiq Khan tried to blame delays by London buses on, say, Arriva, which provides many of the actual physical buses, while fares and routes are set by TfL. He would quite rightly be laughed out of town. But it is no less absurd for Transport Secretary Grant Shapps to blame Arriva for poor services in the north of England, when fares, routes and timetables are set by the DfT, and infrastructure is owned and managed by the DfT.

The correct central argument for renationalising the network is not that it would, in of itself, drive improvements – the amounts that transport companies pay in dividends are huge to you and me but peanuts in terms of government spending – but that it would, at least, correctly land the blame for poor services at the feet of the Secretary of State for Transport. However, while this argument works brilliantly if you are a policy wonk seeking to correctly apportion blame, frankly, neither Shapps nor his hypothetical Labour successors need to renationalise railways in order to take responsibility for them.

The point of all of this is that the argument over whether you nationalise something – and even more importantly how you run it, whether in state or private hands – is a lot more complicated than “which nationalisations are popular with the public”. The question has to be – which of these nationalisations will get Labour – or any other party proposing to nationalise something – closer to the world it wants to build? Labour’s next leader ought to consider that question as well as the calculation about which bits of the economy the British electorate currently thinks are best run by the state.