Red on Blue: Should public services be state-owned or privatised?

Michelle Hufschmid focuses on the example of British Rail to make the case for nationalisation, while Peter Saville contends that the wave of privatisations since the 1980s has been an enormous net gain for ordinary people as well as business

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Red – Michelle Hufschmid

Companies should be nationalised if it improves their services. The most obvious candidate for nationalisation is British Rail, the result of a failed privatisation between 1994 and 1997, whose current state is a mixture of private companies operating trains and—since 2014—a public sector-owned infrastructure. Indeed, its track operator Railtrack declared bankruptcy in 2001 and was reconstituted as the effectively government-controlled Network Rail. Opening up train operations to free market competition between private companies demonstrably failed to improve quality: tickets are overpriced, with only 45 per cent of national passengers satisfied with the value for money of the cost. The trains themselves are frequently delayed, with only 85 per cent of trains punctual this year, and only 20 per cent of the trains operated by Southern in particular were on time.

Such transport is a necessity rather than a choice for most citizens. The absolute priority of the British train system must be to deliver all passengers to their destinations as quickly as possible with an excellent customer experience to affordable prizes. One of the principal expectations from privatisation was that the railway service could be delivered more efficiently in the private sector via the profit motive. However, the Conservative government’s expectation that considerable costs could be slashed were not fulfilled. Efficiency cannot be increased infinitely and British Rail had already done most of what could improve efficiency. The railways should not be run like a company, but as a public service.

The argument for customer power in the free market is that those who do not wish to purchase the product are free to choose another one. However, customer choice is limited by income, time, and the availability of infrastructure, whether track or road. Those who are dissatisfied do not have the opportunity, say, to choose not to commute to work. They may also not just simply drive by car, as this option is often more expensive, and buses are more time consuming. Renationalising British Rail allows it to focus wholly on improving passenger experience while reducing government subsidies.

Beyond the example of British Rail, the system of partially privatised and nationalised companies puts the taxpayer at a considerable disadvantage. In the time of companies that are too big to fail there is no more clear distinction between those privatised and nationalised. This does not just concern banks, but every large, international company represented at the stock market. Beneficial financial and economic policies from governments or central banks protect companies that are considered so important to state economies that their failure would be disastrous. Despite their free market rhetoric, these companies will seek to profit by this government protection by deliberately taking positions that are high-risk and high-return. They can do so because they can leverage these risks based on the policy preference they receive. If business goes well, they keep their profit. If business fails because companies acted overly risky, the tax-payer picks up the tab. A system in which responsibility remains with the government while the profits benefits a lucky few must be abolished in favour of full nationalisation.

 

Blue – Peter Saville

Reading the title of this piece, would you link successful companies like British Airways or even the long-distance haulers Eddie Stobart to past attempts at privatisation? Their examples prove that the face of privatisation isn’t quite as clear cut as an argument for raising efficiency on the railways. Privatisation undoubtedly has its faults, yet it has also been hugely successful in creating a dynamic capitalist system which spreads wealth. Privatisation isn’t the enemy of the state or state ownership, but a partner within the economy to create conditions under which government can thrive.

Originally privatisation in Britain was a reaction against the worst excesses of the post-war settlement where the sticky tentacles of state were wrapped around the car industry, telephones and even long-distance road haulage. The process of cutting free these industries produced Jaguar Cars, British Aerospace and British Airways, some of the most successful names in global business. It is no coincidence that, since BA was privatised in 1987, the fleet of aircraft has grown from 164 to 273 and annual passenger numbers have risen from 17.3 to 37.6 million. Free of political interference, the shareholders boosted productivity and produced cost effective world-class results.

British Telecoms, formed by privatisation in 1981, has moved on from having to wait six months to apply for a domestic telephone to operating in 170 countries and retuning regular profits in excess of £2.45 billion. The facts speak for themselves. But these aren’t just facts and profits: they provide jobs and opportunities for real people every day.

The successes of the 1980s remain relevant now. British Gas was privatised in 1986 and the government sold in excess of 1.5 million shares at a cost of 135p to the average man on the street. The adverts for the programme were titled ‘tell Sid’, presenting a series of ordinary villagers informing their neighbours of the great deal that the government controlled shares gave—and making sure to ‘tell Sid’. I don’t know who Sid was, but wherever he is, he got a pretty good deal: the stock prices have since increased nearly 1300 per cent. This tradition continues. When Post Office stock was sold in 2013, there were 700,000 applications to the government, far outstripping any available supply. There is quite simply a demand for popular and free ownership.

That is part of privatisation’s success: it gives people a role in the capitalist system, drawing them into a sense of ownership and belonging through shares and the success of their companies. In a nation where home ownership is something of a dream rather than a plan for the next 10-15 years, we need to create a sense of belonging and commitment to the capitalist system. 2016 is quickly shaping up as the year of disenfranchised rebellion and, if we want to turn the heat down on the simmering tensions, creating a capitalist system which works for all should be a top priority.

So, when Margaret Thatcher’s claimed that “privatisation is at the centre of any programme of reclaiming territory for freedom”, she was really onto something. Not only is a privatised business more effective and better able to share expertise, it also gives people a taste of the profit. This amounts to a sense of stability in uncertain times and needs to be a key part of creating a successful and free society.

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