Time for a rethink on essential services

Jul 6 2009 by Kevin Rowan, The Journal

THE headlines last week included some pretty big ticket issues: penalties for young people who don’t wish to accept the narrow range of options in the Young Person’s Guarantee; 110,000 new homes; an upturn in manufacturing output; the apparent abandonment of attempts to privatise the Royal Mail; and the utter failure of the National Express operations of the East Coast Mainline leading to its re-nationalisation. What a week.

Of all of these events it is perhaps the dramatic failure of the privatisation of public services that is the most critical, given that the current Government and the main opposition party are both heavily committed to reducing the scale of public sector spending over the few years ahead – implying an increasing role for the private sector in delivering a range of public services.

The official line that ‘conditions right now don’t make privatisation at this time the right thing to do’ clearly has some validity. There isn’t the same degree of private sector cash kicking around as there was a year or so ago. There can be little doubt that pragmatic politics has played a role too, with more than 140 backbench Labour MPs supporting the Communication Workers Union campaign against the proposals. Either way, the outcome is that there is no economic or political appetite for this privatisation venture.

The National Express debacle is different but equally serious. One of the key concerns that trade unions have consistently held about privatisation is what happens when the profits slow and stop delivering enough returns to keep the private sector interested. It comes as no surprise that National Express is effectively walking away, leaving the Government with little option but to take this service back into public ownership – with the taxpayer picking up the bill.

Adding some insult to injury, the way in which the franchise deal was set up, with a new company, NXEC, being established to insulate National Express from financial risk if things (as they have) went belly-up, maximising their loss to £72m. From one point of view that makes business sense; any company would clearly seek to minimise exposure to risk. But from the Government’s point of view this is very poor management – it appears to be a transfer of income-generating opportunity while holding onto risk.

The ECML is a key economic artery for the North East and the success of its operation cannot be something that is allowed to be subjected to the risks inherent with this type of privatisation.

This and previous Governments have seemed determined to continue with their obsession with facilitating a growing role for the private sector in delivering public services, sweetening the deals as much as possible to ensure attractive conditions to private companies. The announcement about the Royal Mail and the ECML situation brings that strategy into clear disrepute. It is time for a rethink on how our essential services are operated; perhaps there’s a case for permanent nationalisation.

Kevin Rowan