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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.

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.

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.

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 first appeared in the 15 February 2018 issue of the New Statesman, The polite extremist

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Labour’s renationalisation plans look nothing like the 1970s

The Corbynistas are examining models such as Robin Hood Energy in Nottingham, Oldham credit union and John Lewis. 

A community energy company in Nottingham, a credit union in Oldham and, yes, Britain's most popular purveyor of wine coolers. No, this is not another diatribe about about consumer rip-offs. Quite the opposite – this esoteric range of innovative companies represent just a few of those which have come to the attention of the Labour leadership as they plot how to turn the abstract of one of their most popular ideas into a living, neo-liberal-shattering reality.

I am talking about nationalisation – or, more broadly, public ownership, which was the subject of a special conference this month staged by a Labour Party which has pledged to take back control of energy, water, rail and mail.

The form of nationalisation being talked about today at the top of the Labour Party looks very different to the model of state-owned and state-run services that existed in the 1970s, and the accompanying memories of delayed trains, leaves on the line and British rail fruitcake that was as hard as stone.

In John McDonnell and Jeremy Corbyn’s conference on "alternative models of ownership", the three firms mentioned were Robin Hood Energy in Nottingham, Oldham credit union and, of course, John Lewis. Each represents a different model of public ownership – as, of course, does the straightforward takeover of the East Coast rail line by the Labour government when National Express handed back the franchise in 2009.

Robin Hood is the first not-for-profit energy company set up a by a local authority in 70 years. It was created by Nottingham city council and counts Corbyn himself among its customers. It embodies the "municipal socialism" which innovative local politicians are delivering in an age of austerity and its tariffs delivers annual bills of £1,000 or slightly less for a typical household.

Credit unions share many of the values of community companies, even though they operate in a different manner, and are owned entirely by their customers, who are all members. The credit union model has been championed by Labour MPs for decades. 

Since the financial crisis, credit unions have worked with local authorities, and their supporters see them as ethical alternatives to the scourge of payday loans. The Oldham credit union, highlighted by McDonnell in a speech to councillors in 2016, offers loans from £50 upwards, no set-up costs and typically charges interest of around £75 on a £250 loan repaid over 18 months.

Credit unions have been transformed from what was once seen as a "poor man's bank" to serious and tech-savvy lenders where profits are still returned to customers as dividends.

Then there is John Lewis. The "never-knowingly undersold" department store is owned by its 84,000 staff, or "partners". The Tories have long cooed over its pledge to be a "successful business powered by its people and principles" while Labour approves of its policy of doling out bonuses to ordinary staff, rather than just those at the top. Last year John Lewis awarded a partnership bonus of £89.4m to its staff, which trade website Employee Benefits judged as worth more than three weeks' pay per person (although still less than previous top-ups).

To those of us on the left, it is a painful irony that when John Lewis finally made an entry into politics himself – in the shape of former managing director Andy Street – it was to seize the Birmingham mayoralty ahead of Labour's Sion Simon last year. (John Lewis the company remains apolitical.)

Another model attracting interest is Transport for London, currently controlled by Labour mayor Sadiq Khan. TfL may be a unique structure, but nevertheless trains feature heavily in the thinking of shadow ministers, whether Corbynista or soft left. They know that rail represents their best chance of quick nationalisation with public support, and have begun to spell out how it could be delivered.

Yes, the rhetoric is blunt, promising to take back control of our lines, but the plan is far more gradual. Rather than risk the cost and litigation of passing a law to cancel existing franchises, Labour would ask the Department for Transport to simply bring routes back in-house as each of the private sector deals expires over the next decade.

If Corbyn were to be a single-term prime minister, then a public-owned rail system would be one of the legacies he craves.

His scathing verdict on the health of privatised industries is well known but this month he put the case for the opposite when he addressed the Conference on Alternative Models of Ownership. Profits extracted from public services have been used to "line the pockets of shareholders" he declared. Services are better run when they are controlled by customers and workers, he added. "It is those people not share price speculators who are the real experts."

It is telling, however, that Labour's radical election manifesto did not mention nationalisation once. The phrase "public ownership" is used 10 times though. Perhaps it is a sign that while the leadership may have dumped New Labour "spin", it is not averse to softening its rhetoric when necessary.

So don't look to the past when considering what nationalisation and taking back control of public services might mean if Corbyn made it to Downing Street. The economic models of the 1970s are no more likely to make a comeback then the culinary trends for Blue Nun and creme brûlée.

Instead, if you want to know what public ownership might look like, then cast your gaze to Nottingham, Oldham and dozens more community companies around our country.

Peter Edwards was press secretary to a shadow chancellor, editor of LabourList and a parliamentary candidate in 2015 and 2017.