Vidya Ram

Re-nationalisation debate heats up in UK

Vidya Ram | Updated on March 16, 2018

People walk out of the United Kingdom's new Supreme Court in Westminster, central London September 14, 2009. REUTERS/Andrew Winning

With privatisation failing to live up to lofty expectations, public discontent has turned the tables in favour of nationalisation

Last Month, as India debated the merits of privatising the nation’s public sector lenders, Britain’s Labour Party hosted a conference on Alternative Models of Ownership, building on pledges made in the party’s 2017 general election manifesto over returning a number of sectors including energy, rail, water and mail back into public ownership. “This is not a return to the 20th century model of nationalisation but a catapult into 21st century public ownership,” Labour leader Jeremy Corbyn told the conference in February. “The failure of privatisation and outsourcing of public services could not be clearer, he insisted, adding that an “obsessive drive to outsource and privatise” had been tried and tested to “destruction.”

Just under 40 years since Margaret Thatcher came to power kick-starting a wave of privatisations across sectors that were also pursued by Labour governments, and helped jump start privatisation initiatives across the world, the radical left-ward shift within the Labour party in Britain has now put the issue of nationalisation firmly back on the public agenda. Commitment to changing ownership structures is fundamental to the vision of the Labour Party of Corbyn, which has firmly rejected the central tenets of New Labour developed under the Tony Blair government of the late 1990s and maintained by party leaders that followed.

Ownership factor

“Building an economy for the many also means bringing ownership and control of the utilities and key services into the hands of people who use and work in them. Rail, water, energy, Royal Mail, we’re taking them back,” said John McDonnell, the party’s shadow chancellor at the Labour Party’s conference last autumn, just months after Corbyn increased Labour’s share of the vote in the June 2017 general elections.

Public or other forms of ownership are key to another important tenet of the McDonnell/Corbyn Labour party — that the financial crises and other situations have pointed to the need not for no government but for “good government.” “The state cannot stand on one side and deliver on its own,” McDonnell told a gathering of Indian business persons in London earlier this year.

While nationalisation would have once been seen as an issue of the “left” — something relegated to murmurings on the backbenches of Labour, the notable thing about the latest debate is that it has struck a chord with the public. Nationalisation formed a prominent part of the party’s 2017 election campaign — which subsequent research suggests helped Labour to its solid performance (though of course there are others who would argue that the question was not why Labour performed as well as it but why it didn’t perform better, given the weakness in the Conservative party). Research by the right of centre think tank, the Legatum Institute, in the aftermath of the election found “widespread support for Labour’s nationalisation agenda and much less support for free enterprise.”

“Instead of an unregulated economy, the public favours regulation. Instead of companies striving for profit above all else, they want businesses to make less profit and be more socially responsible. Instead of privatised water, electricity, gas and railway sectors, they want public ownership. They favour CEO wage caps, workers at senior executive and board level and for government to reign in big business... The capitalism ‘brand’ is in crisis. It is seen as greedy, selfish and corrupt,” the report concludes.

Privatisation woes

The sentiment is reflective of wider discontent in Britain — and beyond — around the status quo, with privatisation failing to live up to the lofty expectations of it. Britain’s rail system — which comprises an array of private companies holding rail franchises, working in tandem with the public body Network Rail, responsible for rail infrastructure — continues to cause much anger and consternation in Britain, with fare rises not being matched by tangible improvements in infrastructure or service. Trains are often overcrowded, and services enmeshed in controversy, such as last year when those living in the affluent south west suburban belt round London saw their service grind to a halt at points as their rail operator engaged in a standoff within unions.

Earlier this year, the government was forced to bring in legislation to enforce an energy cap to protect the most vulnerable, amid rising prices. Since then a number of developments have stoked concerns further. The dramatic collapse of Carillion, a private contractor that held over 450 public sector contracts, from the construction of hospitals to the electrification of Network Rail, was leapt on by critics of privatisation. “This is not one isolated case of government negligence and corporate failure; it is a broken system... We need our public services to be provided by public employees with a public service ethos and a strong public oversight,” Corbyn told Parliament at the height of that crisis.

Re-nationalisation, and more

While discontent with the status quo certainly works in Labour’s favour, the question is whether it can hold on to the support. Key to that will be arriving at a solution to the private/public debate that avoids looking like its casting back to the past for its answers. It has so far attempted to do so — positioning the need for national ownership in terms of benefits such as long-term public planning, the modernisation of infrastructure, and tackling climate change.

“The challenge of climate change requires us to radically shift the way we organise our economy,” Corbyn said in his speech on alternative ownership models earlier this year. “We need a publicly-owned grid to act as the great leveller, distributing energy from where it is plentiful to where it is scarce and guaranteeing that everyone has access to clean, affordable energy all of the time.”

The question will be as it puts flesh on the bones, how sentiment develops. McDonnell has suggested that re-nationalisation of utilities would be “cost neutral” though one think tank the Centre for Policy Studies would cost the government £176 billion, or 10 per cent of national debt.

The industry body the CBI warned this week that renationalisation would cause as much damage to Britain’s economy as a hard Brexit. The Conservatives have repeatedly dismissed the plans as meaning hundreds of billions more borrowing and higher debt and taxes. However, such simple warnings — or simple insistence on the proven benefits of privatisation with limited concrete examples to go by — will do little to tackle deep rooted discontent about the status quo. The Brexit referendum was, after all, a powerful reminder that simple scare tactics rarely work, and it will take more than dire warnings to knock public sentiment.

Published on March 16, 2018

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