Privatisation has become the epitome
of the neoliberal policy paradigm. It has become synonymous with Thatcherism in
the United Kingdom. Successive Conservative, Labour and coalition governments
have preserved the consensus on privatisation, since the initial raft of
privatisations of the government of Margaret Thatcher in the 1980s.
Privatisation
is when the ownership of a company or industry passes into the hands of private
shareholders and private managers. It contrasts with nationalisation, when a
company or industry is publicly owned by the state, and mutualisation, when a
company or industry is owned by its stakeholders and/or workers. Over the past
four decades, privatisation has been applied to the energy industry (most
notably British Gas and its “if you see Sid tell him” share sale campaign), the
water industry, British Rail, Royal Mail, telecommunications (most notably BT),
aviation and the vast majority of building societies. Even services within the
NHS have been outsourced to private companies.
Not all
these examples of privatisation have been a disaster, some have been very
successful. The privatisation of telecommunications and aviation have proven to
be a roaring success with a truly competitive market able to function to
provide genuine choice for customers. However, these examples are more the
exception, than the rule.
As Britain
teeters on the edge of the social catastrophe caused by the huge looming cost
of living crisis, senior politicians are starting to question the
sanctity of privatised industries. While public support for public ownership is high. In this article, I shall
briefly discuss how progressives ought to address the privatisation of energy,
the railways and water.
Energy
No
privatised industry is coming into as much scrutiny in contemporary British
politics as the privatised energy industry. On 26th August, the
government will set the level of the energy price cap. It is unanimously
expected to rise considerably. British consumers have already seen their gas
and electricity bills skyrocket, and in the coming months they are due to hit unprecedented
levels. Upwards of
10 million British citizens face being pushed into fuel poverty. Britain faces the biggest social
crisis since the 1970s and perhaps even the 1930s. While the big energy
companies make record profits.
How ought
politicians to respond to this almighty social crisis on the horizon? The New Economics Foundation supports the introduction of a much
higher windfall tax set at 45% of the profits of the oil and gas companies. The
Liberal Democrats, and now Labour, have called for October’s energy
price cap rise to be scrapped. While the Green Party has called for a super tax to be
placed on the “dirty profits” of the big oil and gas companies to pay for the
mass insulation of people’s homes. In addition, the Co-operative Party has called for the Household Support
Fund to at least be doubled. All of which are great immediate policy solutions.
All of which the government should immediately act upon.
But what
should progressives do in relation to the ownership model of the energy
industry? Echoing Gordon Brown’s recent calls, any energy companies which are
unable or unwilling to lower energy prices for consumers should be taken into
public ownership. Any energy companies taken back into public ownership, should
only be returned to the private sector if a truly competitive energy market is
able to function. However, if an effective competitive market is not able to
function in gas and electricity, and there is reason to suspect this, then the
state should reserve the ultimate right to transfer all the privatised energy
companies into public ownership. This should follow similar lines to EDF and
the French Government.
It also must
be asked whether the privatised energy companies are capable of meeting
Britain’s climate change commitments. As the real-world impacts of climate
change are being felt, can Britain rely on an energy sector that is still
overly dependent on the high profits that come from fossil fuel emissions? The
very emissions that are destroying the environment. Any approach of
environmental planning needed to mitigate climate change would struggle to be
realised, if carbon hungry energy companies continue to put profits ahead of
people and planet.
The
privatised model of energy provision has had 40 years to prove that it can benefit
customers. It has had 30 years to prove that it can go green and radically
decarbonise. It has failed on both counts. It is becoming clear that the current
privatised energy companies are incompatible with Britain’s net zero
commitments. Climate change is already a lived reality for billions of people
on planet Earth. We are feeling its effects here in Britain. The day is rapidly
coming when the state will have to take urgent interventionist action as the climate emergency becomes a full-blown climate crisis.
Given the
limited capacity for a genuine competitive market in energy and the increasing
urgency with which Britain needs to decarbonise, not to mention the need to
lower energy bills, then the nationalisation of the privatised energy companies
is likely to be the only viable route to take. Environmental realism, more than
socialism, will eventually result in the need for the central state to take control
over the national energy supply. In this scenario, even mutualisation would not
be sufficient, as the state would have to take radical economic action to
address climate change.
But even if
energy remains privatised for the meantime, we cannot go back to business as
usual. The state should strengthen the energy regulators to address any unfair
and anti-competitive practices by firms in the energy market, such as
price-fixing. The government should also sponsor widespread community owned
green energy cooperatives, such as community owned wind turbines and solar
panels.
Finally, the
age of the big oil and gas companies paying zero tax must end. We should implement a
radical carbon tax on the part of the profits of the energy companies generated
by carbon emissions, with the proper tax infrastructure to ensure that the
carbon tax is properly collected. We should seek to emulate Sweden’s approach,
which has one of the highest carbon taxes in the world. The money generated
should be used to invest in state and community owned renewable energy
generation.
The
Railways
The railways
have continually been a source of contention ever since they were privatised in
the 1990s. The railways are a natural monopoly, with one section of train line
franchised out to only one private company at any one time. The tickets for rail
users continue to go upwards, as the standard of service on the
railways remains highly varied, while the pay packets of railway executives continue to bulge.
In truth,
the railways are already semi-nationalised. The operating company, Network
Rail, which administers the railway infrastructure is already publicly owned.
It is essentially just the rail stock itself which is privatised. This is the
craziest form of privatisation imaginable. The infrastructure of a natural
monopoly is nationalised, while the profits of the railways are leached off by
the private sector. The risk has been nationalised, while the reward has been
privatised. The privatised railways are structured as a rich rail executive’s
charter. This farce has to end.
But even in
regard to the rail stock, the picture is far from consistent across the whole
of the UK. Essentially all of the rail stock for Scotland, Wales, Northern
Ireland, Greater London and Kent are already publicly owned. Approximately half
of the rail services in the North of England are already publicly owned, with a
notable portion of the services in the East Midlands also nationalised. In
addition, rail freight transportation is publicly owned.
The railways
should be entirely and permanently nationalised and taken into public
ownership. However, we should reject a statist and bureaucratic model of
renationalisation. Instead, while the railways should be publicly owned, the
running of the railways should be more bottom up, mutual and democratic. Rail
users, rail workers and community groups which rely on the railways should have
a democratic say over the management of the new British Rail. All the members
of British Rail, would be entitled to a periodic dividend as profits are shared
in the form of price cuts to tickets. In practice this model would work on a
similar basis to that of a consumer cooperative.
Therefore, initially the railways should be nationalised and then transferred into mutual ownership, financed by the state. It is reasonable to ask why we should not initially just mutualise the railways right away. The reason is that the railway system is already semi-nationalised. It makes sense to complete the nationalisation first. Also, any new British Rail would require initial central, national coordination in the first instance, which only the state can provide.
Water
As regions
of the UK head into drought, as climate change begins to have an impact on
Britain’s water supply, it has to be asked whether we can still afford the
privatised model of the water industry. Added to this, the water crisis has
been compounded by the inefficiency of the water companies as up to a quarter of their water is lost in
leaks. While water executives
continue to reap huge salary rises.
Water is a
near absolute natural monopoly. The majority of water users in the UK have just
one water supplier. There is absolutely no viable competitive market possible
when it comes to the supply of water. There are only so many reservoirs,
aquifers and rivers to get water from. Water like all natural resources is
limited and finite. Once again, the privatised water industry benefits the
private water companies and their executives, while maladministration is rife
across the privatised water network.
An alternative
to the privatised model of the water industry can be seen in the corporate
governance model of Welsh Water, the water company that administers almost all
of the water supply in Wales. Welsh Water is structured as a mutual company on
a non-for-profit basis. The profits that the company makes are reinvested into
the maintenance of the Welsh water supply and into lowering the bills of water
users.
The entire
water industry in England should be mutualised along lines similar to that of
Welsh Water. The mutualisation of water will lead to lower bills for water
customers and a more efficient water service as more profits are reinvested
into the maintenance of the water system. Profit sharing and not state
management should be the driving feature of a model away from water
privatisation. Also, the regional basis of the pre-existing English water
suppliers lends itself more to mutualisation than nationalisation. Therefore,
regional water non-for-profit mutual companies are more preferable than a
state-centric nationalised water industry.
Can we
still afford privatisation?
Privatisation
was quite literally sold to the British public on the basis of creating a
property-owning democracy of citizen shareholders. In practice however,
privatisation has resulted not in the creation of a property-owning democracy,
but in the creation of a property-owning aristocracy of wealthy corporate executives
and elite shareholders. Private executives and shareholders reap the profits
and dividends of the privatisation of the utilities and the railways, while
customers have to contend with ever higher prices to use these essential
services.
Britain’s
natural wealth and profit is being squandered away by incompetent managers, corporate
executives and distant wealthy shareholders. Imagine if that wealth and profit
went straight to the public exchequer in order to ensure
a just transition to a green future. Alternatively, imagine if that wealth
and profit was shared more fairly by being reinvested into services and into
lowering the bills of customers.
For too
long, privatisation has been a charter for rich executives to plunder Britain’s
natural asset-based wealth. This is wealth that should be going to the
government and/or being reinvested to improve services and help customers. In
energy, the railways and water, a natural competitive free market does not
operate. The railways and water are natural monopolies, while an effective
competitive market struggles to operate in energy, if it even operates at all.
In such scenarios, the public are increasingly squeezed as they are made to pay
ever higher prices for unsatisfactory services, as the profits generated are
squirrelled away into the pockets of a private elite few.
At a time
when we are facing an entrenched cost of living crisis, when the NHS and other
essential public services are stretched to breaking point, as the price of
everyday essentials continue to skyrocket, Britain can no longer afford to lose
such essential wealth and profit into the hands of private shareholders. The
age of privatisation has to end, and in its place a new age of nationalisation
and mutualisation should take its place. The only question is, do Labour and
the Liberal Democrats have the courage to propose a radical alternative to
privatisation?
(Chart of my alternative energy, railway and water ownership models)
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