In the early 1980s the axis of egos between an American actor turned President and the Iron Lady ushered in an era typified by the dramatic iron-grip of neoliberalism on both sides of the pond. Supposedly free market values were extolled, and in Britain under successive Tory governments public assets were sold off en masse: from British Steel to British Telecom, British Petroleum to British Airways, regional water companies to the railways. Though in the political wilderness, there was at least a voice of opposition in the form of Labour during these years.
But since Tony Blair’s New Labour swept to power on a wave of Private Finance Initiatives, there’s been a disconcerting cross-party consensus on the benefits of marketisation, with no frontier considered too sacred to be opened up to the ravenous appetite of privatisation, including prisons, hospitals and even schools. With the general election looming is it time to put renationalisation – or at least the rolling back of the most pernicious acts of privatisation – back on the mainstream political table?
When profit is pursued over the public good, scandals will follow
Recent memory serves up a spate of haunting reminders as to the dangers of entrusting certain vital public services in the hands of profit-driven companies. Private security firm G4S received a £284 million contract for the outsourcing of policing duties during the 2012 Olympic Games. Its handling of the matter was a complete farce, when it was only able to summon 4,000 of the 13,700 guards it was contracted to provide, leaving the military and the police – and ultimately the British taxpayer – to step in to cover the shortfall.
The same company, along with another outsourcing firm, Serco were in 2013 found to have defrauded the taxpayer to the tune of tens of millions of pounds, by deliberately charging for ankle tags on criminals who were either dead or already in jail. Both cases make clear, the pursuit of profit by the companies was placed above the need to fulfil the public service.
Health and social care is one of the most contentious areas when it comes to privatisation, with profits and patient welfare often seen as at odds. Nowhere is this more apparent than in the repeated scandals over neglect and abuse in care homes. A coroner found that five residents died as a result of “sub-optimal care” at the privately-run Orchid View care home between 2009-2011, prompting a serious case review.
Russel Tucker, the son of one of the five victims told the BBC “The private sector is not the place for the care of the most vulnerable in society, and it has failed,” whilst Judith Charatan, the daughter of another resident said “it was unforgivable that they were simply filling up beds to make money”. A survey of social workers and care-home managers cited understaffing, low pay and lack of adequate training for poor levels of care, all factors that would ultimately affect a care company’s bottom line.
The NHS, crippled by successive privatisation initiatives?
Marketisation of the NHS was introduced by New Labour through a raft of PFI schemes used to build new hospitals. But the schemes make for terrible value for money for the taxpayer and incredible profits for the companies who provide the loans. Most PFI agreements cost three to five times the initial outlay, but in some cases companies make as much as a 700% return on their investment, meaning the taxpayer pays seven times the cost of building a hospital back in charges over the course of the agreement. This has left NHS hospitals with a staggering £80 billion debt in PFI loan charges, considerably more than if they had been built by public borrowing.
Whilst New Labour introduced marketisation, the Coalition Government has brought in full-blown privatisation by making it compulsory for NHS contracts to be available for bidding on the free market. The NHS is in real trouble. Thanks to austerity measures, NHS trusts are now running a deficit of more than £100 million, compared to a surplus of £383 million the previous year, with 66 trusts now in the red. The vultures of private finance are circling, sensing cut-price deals. Many of these troubled trusts are hit with crippling PFI repayments, in other words, money is flowing into the pockets of the PFI companies rather than into patient care. The vagaries of private finance has to an extent got the NHS into the mess it is in; it is the cause but is being presented as the cure.
Public sell-offs don’t guarantee value for money
The rhetoric of privatisation argued by governments is often to reduce public debt by selling off assets that would be more efficiently administered by the private sector. The logic being, if assets are to be sold, at least the public will get value for money. But as the Royal Mail sell-off so spectacularly demonstrated, this is often not the case. The Government grossly undersold Royal Mail shares by some £1 billion pounds, which was siphoned from the taxpayers pocket into the arms of speculators.
The Business Secretary Vince Cable had promised to avoid selling the shares to “speculators and spivs” and instead make sure they were entrusted with “responsible long-term institutional investors”. However, it emerged 13% of the shares were sold to hedge funds, who bought the shares at 330p each before many sold them on just weeks later at 600p, making a staggering 81% profit at the expense of the taxpayer. This was reneging on a ‘gentleman’s agreement’ that the companies would hold onto the shares for the long term.
Private rail and energy firms are run for taxpayers’ benefit, just not British ones
Britain has the most expensive trains in Europe. And yet, the rail companies, acting as monopolies on their lines still receive huge taxpayer subsidies, meaning passengers end up effectively paying twice for their tickets. Up until recently, the East Coast mainline was being run by the publicly-owned Directly Operated Railways, after the previous private operators dropped the ball. It was a huge success, being the only profitable line in the country, contributing some £1 billion pounds back the exchequer since 2009. This success was an embarrassment for the ideology of privatisation, so the line was recently hastily sold off to Virgin and Stagecoach.
Perhaps most perversely, many of the so-called private providers of rail services in this country are actually publicly-owned by other governments. For instance, the German Government’s Deutsche Ban owns Arriva Trains. A German official was quoted as saying “We’re skimming profit from the entire Deutsche Bahn…it is invested in the rail network here in Germany,” so effectively British passengers and taxpayers are paying for rail improvements in Germany. This is completely nonsensical and proves that the railways could be operated publicly, to the benefit of the taxpayer. The inefficiencies associated with the fragmented nature of Britain’s railways, coupled with the dividends paid to private (and in some cases foreign public) shareholders could instead be used to improve services for UK passengers and curb, or even roll back, ever-rising fares.
It’s the same story when it comes to energy companies. EDF Energy, one of the ‘big-six’ are owned by the French government. Last year EDF made a profit of more than £600 million. Once again, this is money that could be going into the public purse in Britain, instead of benefiting French taxpayers.
The view for the election
Whilst it’s impossible to say with certainty what each party’s election policies will look like until the manifestos are released, we do have a vague sense of where most parties stand on key issues relating to privatisation/renationalisation. The most likely course for the Conservatives is to push for more frontiers to be privatised. The Liberal Democrats have made no indication of rolling back any privatisation measures. Labour has promised a “shake-up” of the railways and price caps on energy supply, though renationalisation seems off the agenda in both areas. As for the NHS, there have been murmurings that they would put an end to the “creeping privatisation” under the Coalition Government, but no firm stance on PFI. Even UKIP has said it would scrap PFI in relation to the NHS and encourage the early buy out of PFI contracts. Only the Green Party has a fairly comprehensive policy of repealing privatisation across several sectors, including the NHS, the railways, energy companies and bringing free schools and academies into local authority control.
As the above examples have shown, privatisation has for too long in too many areas been siphoning money off from the taxpayer into the hands of the already-rich. For vital services like health and social care, the profit motive is sometimes detrimental to the welfare of patients. Labour’s stance on the NHS aside, it seems likely that the cross-party consensus on privatisation will continue in the lead up to the next election amongst the traditional big three. But with a recent surge in popularity for other parties including The Greens, the SNP, Plaid Cymru and UKIP, if these parties are willing to engage with the idea of rolling back privatisation, it could be higher up the agenda than it has been in more than twenty years. It’s about time too.
Image: Lydiashiningbrightly (flickr) used under CC BY 2.0